CVU 10-K & 10-Q changes, risk factors and insider trading
Cpi Aerostructures Inc. · NYSE · Aircraft Parts & Auxiliary Equipment, Nec · CIK 889348 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We depend on a limited number of prime contractors and government customers for a significant portion of our revenue.”
New heading “A significant portion of our revenue is derived from a limited number of aerospace and defense programs.”
New heading “Our backlog may not be indicative of future revenue and may not result in realized revenue.”
New heading “We may experience liquidity constraints if we are unable to finance working capital requirements associated with our contracts.”
New heading “Our contracts with the U.S. Government and prime contractors are subject to audit and oversight, which could adversely affect our business.”
New heading “We depend on suppliers for materials, and services, and disruptions in our supply chain could adversely affect our ability to fulfill our contracts.”
New heading “Cybersecurity incidents, system failures and technological changes, including developments in machine learning and generative artificial intelligence, could adversely affect our business and operations.”
New heading “We must maintain certain approvals, qualifications and certifications to manufacture products for our customers.”
New heading “We may be subject to fines and disqualification for non-compliance with Federal Aviation Administration regulations.”
New heading “Any lawsuit to which we are a party, regardless of merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices.”
New heading “Geopolitical conflicts, including the current escalation involving Iran, Israel and the United States, as well as terrorism and other global security threats, could adversely affect our business, financial condition and results of operations.”
New heading “Risks Related to Our Internal Controls and Financial Reporting”
New heading “If we fail to maintain effective internal control over financial reporting, our ability to accurately report our financial results could be adversely affected.”
New heading “Risks Related to Our Tax Attributes”
New heading “Our ability to utilize our net operating loss carryforwards may be limited, which could reduce the value of these tax attributes and adversely affect our financial condition and results of operations.”
New heading “Risks Related to Our Indebtedness”
New heading “We are subject to financial covenants under the Loan and Security Agreement with Western Alliance Bank and a failure to comply with those covenants could result in a default that could materially adversely affect our liquidity and operations.”
New heading “Our obligations under the Loan and Security Agreement are secured by a first priority security interest in substantially all of our assets, which could limit our financing flexibility and expose our assets to foreclosure in the event of a default.”
New heading “The Loan and Security Agreement contains restrictions on our operations that may limit our business flexibility.”
New heading “Our cost of borrowing under the Loan and Security Agreement is based on a variable interest rate and increases in interest rates could negatively impact our profitability.”
Removed heading “We depend upon a select base of large prime defense contractors for the majority of our revenue, which subjects us to unique risks which may adversely affect us.”
Removed heading “We may be subject to fines and disqualification for non-compliance with Federal Aviation Administration (“FAA”) regulations.”
Removed heading “Our working capital requirements may negatively affect our liquidity and capital resources.”
Removed heading “Cyber security attacks, internal system or service failures and technological changes, including the use of machine learning and generative artificial intelligence, may adversely impact our business and operations.”
Removed heading “Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership change”.”
Removed heading “Risks Related to Our Indebtedness and Liquidity”
Removed heading “In the past, CPI obtained amendments to and received waivers of and consents to non-compliance with certain covenants under our credit facility with BankUnited and there can be no assurance that we will not fall out of compliance with our covenants in the future.”
Removed heading “Our capital requirements, liquidity and financial condition raise significant risks as to our ability to continue as a going concern.”
Removed heading “Our cost of borrowing under the Credit Agreement is based on the Prime Rate of interest per annum published in the Money Rates section of The Wall Street Journal (the “Prime Rate”) plus the margin charged by our lender, and increases in the Prime Rate negatively impact our profitability.”
Removed heading “We have identified material weaknesses in our internal control over financial reporting over a number of years which adversely affected our ability to report our financial condition and results of operations in a timely and accurate manner. The material weaknesses led to multiple restatements of our consolidated financial statements. The material weaknesses and restatements have resulted in our failure to meet SEC reporting obligations, affected and may continue to affect investor confidence, our stock price and our ability to raise capital in the future, and have resulted and may continue to result in stockholder litigation.”
Removed heading “The conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist acts and acts of war may seriously harm our business, results of operations and financial condition.”
Removed heading “We cannot predict the consequences of future geo-political events on our operations or our profitability.”
Largest changes
“We have identified material weaknesses in our internal control over financial reporting over a number of years which adversely affected our ability to report our financial condition and results of operations in a timely and accurate manner. The material weaknesses led to multiple restatements of our consolidated financial statements. …”see in full comparison
“We are subject to financial covenants under the Loan and Security Agreement with Western Alliance Bank and a failure to comply with those covenants could result in a default that could materially adversely affect our liquidity and operations.”see in full comparison
“The conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist acts and acts of war may seriously harm our business, results of operations and financial condition.”see in full comparison
“If a future failure in internal control should occur, it may cause us to fail to meet SEC reporting obligations, negatively affect the accuracy of our financial statements and disclosures, investor and customer confidence, our ability to raise capital in the future and result in events of default under our banking agreement, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties and additional stockholder litigation, and have a material adverse impact on our business and financial condition.”see in full comparison
“Our capital requirements, liquidity and financial condition raise significant risks as to our ability to continue as a going concern.”see in full comparison
“Any lawsuit to which we are a party, regardless of merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices.”see in full comparison
Full comparison: every changed paragraph (104)
In
addition to other risks and uncertainties described in this Annual Report on Form 10-K, the following material risk factors should be
be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results,
results, liquidity, and financial condition. As a result of the risk factors set forth below, actual results did and could continue
to differ materially from those
projected in any forward-looking statements.
We
are a supplier, either directly or as a subcontractor, to the U.S. Government and its agencies.agencies We depend on government contracts
forand a significant portion of our business.business
depends on government contracts. If we are suspended or barred from contracting with the U.S. Government, if our reputation
or relationship with individual
federal agencies were impaired, or if the U.S. Government otherwise ceased doing business with
us or significantly decreased the amount
of business it does with us, our business, prospects, financial condition, and operating
results wouldof operations could be materially adversely affected.
We depend on a limited number of prime contractors and government customers for a significant portion of our revenue.
A significant portion of our revenues is derived from programs performed for a limited number of prime defense contractors and government customers. These significant customers – Raytheon, Sikorsky, Lockheed Martin, and the United States Air Force – constituted approximately 38%, 20%, 11% and 11%, respectively, of our 2025 revenue. Our revenues from these customers are diversified over several different A&D products, programs, and subsidiaries within these customers. However, any significant change in production rates by any of these customers would have a material effect on our results of operations, and cash flows. There can be no assurance that these customers will continue to purchase products from us at current levels, that we will retain these relationships, or that we will be able to establish comparable relationships with other customers if one or more of these customers reduces or terminates its business with us.
A significant portion of our revenue is derived from a limited number of aerospace and defense programs.
Production levels for specific aerospace or defense programs may vary due to changes in government funding, customer demand, program priorities or technical issues. If production levels for programs on which we depend are reduced or if those programs are delayed, terminated or experience lower demand, our revenues and results of operations could be adversely affected.
Our backlog may not be indicative of future revenue and may not result in realized revenue.
Our backlog represents the estimated value of expected future sales under existing contracts and purchase orders. However, backlog is not necessarily indicative of future revenue to be realized or the timing of such revenue. Production quantities and delivery schedules under existing programs may change, and customers may modify, delay or cancel orders. In addition, many of our contracts are subject to engineering changes, scope modifications, contract adjustments or requests for equitable adjustment, which may affect program scope, pricing or delivery schedules. As a result, the amounts included in backlog may change over time and may not be realized as revenue in the periods we expect or at all. In addition, a portion of our backlog relates to long-term production programs that may extend over several years. These programs are subject to changes in production rates, program requirements and other factors that may affect the timing and amount of revenue recognized. Backlog amounts may also reflect assumptions regarding production quantities, pricing, contract scope and other factors that may change over time. Changes in program requirements, production schedules, contract terms or customer demand could affect our ability to convert backlog into revenue and could adversely affect our results of operations and financial condition.
We may experience liquidity constraints if we are unable to finance working capital requirements associated with our contracts.
Our business requires significant working capital to support the production of complex aerospace and defense aerostructures and aerosystems. Under many of our contracts, we must incur costs for materials, labor and production activities before receiving corresponding customer payments. As a result, we may be required to finance inventory purchases, long-lead materials, engineering work and other production costs for extended periods before reimbursement through contract billings or milestone payments.
Our working capital requirements can vary significantly depending on, among other things, the timing of new program awards, the completion of mature programs, the ramp-up of new production programs, production schedules, changes in production rates on existing programs, inventory requirements and the payment terms with our customers and suppliers. In certain circumstances, customer payment terms may require us to fund production activities before receiving payment, while our suppliers may require shorter payment terms, deposits, price increases or other changes in commercial terms, which may significantly increase the amount of working capital required to support our operations.
In addition, many of our contracts are subject to engineering changes, scope modifications, customer-directed design changes or other contract adjustments. In some cases, we may be required to perform additional work or incur additional costs before the related pricing adjustments are finalized with the customer, including through requests for equitable adjustment or other contract modifications. The negotiation, approval and recovery of amounts associated with these adjustments may take significant time and may not align with the timing at which we incur the related costs which may require us to finance those costs for extended periods.
Our liquidity position may also be affected by the need to maintain inventory for production programs, including long-lead materials detail parts, and by changes in supplier pricing or payment terms. In addition, changes in production schedules, program delays or reductions in production rates by our customers may affect the timing of revenue recognition and cash receipts while we continue to incur production costs.
As a result of these factors, our cash flows from operations may fluctuate and may not always be sufficient to fund our working capital requirements. At times, our liquidity may become constrained, particularly if program changes, payment delays, supply chain disruptions, production rate changes or other operational factors increase our working capital needs, or if financing is not available to fund those requirements.
We currently rely in part on borrowings under our credit facility to support our working capital requirements, and our ability to access that financing may be critical to funding production activities prior to receiving customer payments. If our cash flows from operations and available borrowings are insufficient to meet our working capital needs, we may need to obtain additional financing or take other actions to manage liquidity. There can be no assurance that such financing would be available on acceptable terms, or at all. Any inability to adequately finance our working capital requirements could adversely affect our ability to execute our production programs, convert backlog into revenue, meet production schedules and satisfy our ongoing operating and contractual obligations. See “Risks Related to Our Indebtedness” below.
Our contracts with the U.S. Government and prime contractors are subject to audit and oversight, which could adversely affect our business.
Contracts involving the U.S. Government are subject to audit and oversight by governmental authorities, including the Defense Contract Audit Agency. These audits may review contract pricing, cost allowability and compliance with applicable procurement regulations. If costs are determined to be unallowable or improperly allocated, we may be required to repay amounts previously reimbursed or adjust future billings. Unfavorable audit findings or alleged noncompliance with procurement laws or regulations could also lead to contract disputes, penalties, suspension or debarment from government contracting, which could adversely affect our business, financial condition and results of operations.
The
funding of U.S. Government programs is subject to congressional budget authorization and appropriation processes. For many programs,
the U.S. Congress appropriates funds on a fiscal year basis even though a program may extend over several fiscal years. Consequently,
programs are often only partially funded initially and additional funds are committed only as Congress makes further appropriations.
Appropriations are driven by numerous factors, including geopolitical events, macroeconomic conditions, the ability of the U.S. Government
Government to enact relevant legislation, such as appropriations bills and continuing resolutions, the threat or existence of
a government shutdown
and potential downgrades of the United States’ credit rating, and riskschanges relatingin togovernment thepriorities recentresulting U.S.from elections or
presidentialchanges election.in administration. We cannot predict the extent to which total funding and/or funding for individual programs will be included,
increased or reduced in budgets approved by Congress or be included in the scope of separate supplemental appropriations. In the event
event that appropriations for any of our programs becomesbecome unavailable, or isare reduced or delayed, our contract or subcontract under
such program
may be terminatedterminated, including for convenience, or otherwise adjusted by the U.S. Government, which could have a material adverse effect
on our future sales
under such program,program and on our financial position, results of operationsoperations, and cash flows.
We
haveface risks associated with competing in the bidding process for and performing under competitively awarded contracts.
Many of our contracts are awarded through a competitive bidding process. In pursuing these opportunities, we must prepare bids and proposals based on estimates of costs, technical requirements and delivery schedules before the work is performed. As a result, we may encounter unforeseen technological difficulties, cost increases or performance challenges that could adversely affect contract profitability. In addition, we devote substantial time and resources to preparing bids and proposals for contracts that may ultimately not be awarded to us. Even when we are successful in obtaining a contract, the contract may not achieve the profitability we anticipated when the bid was submitted.
We
obtain many of our contracts through a competitive bidding process. In the bidding process, we face the following risks:
Operating margin is adversely affected when contract costs that cannot be billed to customers are incurred. This cost growth can occur if estimates to complete a contract increase due to technical challenges or if initial estimates used for calculating the contract price were incorrect. The cost estimation process requires significant judgment and expertise. Reasons for cost growth may include unavailability and productivity of labor, the nature and complexity of the work to be performed, the effect of change orders, the availability and cost of materials, tariffs, inflationary pressures, the effect of any delays in performance, availability and timing of funding from the customer, natural disasters, pandemics, and the inability to recover any claims included in the estimates to complete. A significant increase in cost estimates on one or more programs could have a material adverse effect on our financial position or results of operations.
We primarily recognize revenue from our contracts over the contractual period pursuant to ASC 606. Pursuant to ASC 606, revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at the completion of the contract. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded on our consolidated balance sheet as an asset captioned “Contract assets.” Contracts where billings to date have exceeded recognized revenues are recorded on our consolidated balance sheet as a liability captioned “Contract liabilities.” Changes to the original estimates may be required during the term of the contract. Estimates are reviewed quarterly and the effect of any change in the estimated gross margin percentage for a contract is reflected in the consolidated financial statements for the period the change becomes known. ASC 606 requires the use of considerable estimates in determining revenues and profits and in assigning the amounts to accounting periods. As a result, there can be a significant disparity between earnings as reported and the cash actually received during any reporting period.
We continually evaluate all the issues related to the assumptions, risks and uncertainties inherent with the application of ASC 606; however, there is no assurance that our estimates will be accurate. If our estimates are not accurate or a contract is terminated, we will be forced to adjust revenue in later periods. These estimates and adjustments may also affect revenue recognition, contract assets and liabilities and cash receipts under our contracts, which could adversely affect our financial condition and results of operations.
New programs with new technologies typically carry risks associated with design changes, development of new production tools, increased capital and funding commitments, ability to meet customer specifications, delivery schedules and unique contractual requirements, supplier performance, ability of the customer to meet its contractual obligations, and our ability to accurately estimate costs associated with such programs. In addition, any new program may not generate sufficient demand or may experience technological problems or significant delays in the regulatory or other certification or manufacturing and delivery schedule. If we were unable to perform our obligations under new programs to the customer’s satisfaction, if we were unable to manufacture products at our estimated costs, or if a new program in which we had made a significant investment was terminated or experienced weak demand, delays, or technological problems, then our business, financial condition and results of operations could be materially adversely affected. These risks include the potential for default, quality problems or inability to meet specifications, our inability to negotiate final pricing for program changes, the potential for low-margin or forward-loss contracts and the risk of writing off contract assets if they are deemed unrecoverable. In addition, beginning new work on existing programs also carries risk associated with the transfer of technology, knowledge, and tooling.
To perform on new programs, we may be required to expend upfront costs which may not have been negotiated in our selling price. Additionally, we may have made margin assumptions related to those costs, that in the case of significant program delays and/or program cancellations, or if we are not successful in negotiating favorable margin on scope changes, could cause us to experience margin degradation which may be material, for costs that are not recoverable. Such charges and the loss of up-front costs could have a material adverse effect on our financial condition and results of operations.
We depend on suppliers for materials, and services, and disruptions in our supply chain could adversely affect our ability to fulfill our contracts.
Our manufacturing operations rely on a network of suppliers that provide raw materials, detail parts, assemblies and specialized services used in our production processes. In some cases, these materials and services are obtained from a limited number of suppliers or require qualification by our customers. Disruptions in our supply chain, including supplier financial difficulties, production interruptions, labor shortages, transportation disruptions, or delays in the delivery of materials or services, could affect our ability to meet production schedules or fulfill contractual obligations. In addition, increases in the cost of materials may not always be recoverable under our contracts, particularly under firm fixed-price arrangements. Any such disruptions or cost increases could adversely affect our results of operations, financial condition and customer relationships.
We
depend upon a select base of large prime defense contractors for the majority of our revenue, which subjects us to unique risks
which may adversely affect us.
We
currently generate a majority of our revenues by producing products for numerous programs under contracts with three prime defense
contractors to the U.S. Government. These significant customers – Raytheon, Lockheed Martin and United States Air Force
– constituted approximately 36%, 24% and 14%, respectively of our 2024 revenue. Our revenues from these customers are diversified
over several different A&D products, programs, and subsidiaries within these customers, however, any significant change in
production rates by any of these customers would have a material effect on our results of operations and cash flows. There is
no assurance that our current significant customers will continue to buy products from us at current levels, that we will retain
any or all our existing significant customers, or that we will be able to form new relationships with other customers upon the
loss of one or more of our existing significant customers.
We
are required to comply with extensive and frequently changing environmental regulations at the federal, state, and local levels.
Among other things, these regulatory bodies impose restrictions to control air, soil, and water pollution, to protect against
occupational exposure to chemicals, including health and safety risks, and to require notification or reporting of the storage,
use, and release of certain hazardous substances into the environment. This extensive regulatory framework imposes significant
compliance burdens and risks on us. In addition, these regulations may impose liability for the cost of removal or remediation
of certain hazardous substances released on or in our facilities without regard to whether we knew of, or caused, the release
of such substances. Furthermore, we are required to provide a place of employment that is free from recognized and preventable
hazards that are likely to cause serious physical harm to employees, provide notice to employees regarding the presence of hazardous
chemicals and to train employees in the use of such substances. Our operations require the use of a limited amount of chemicals
and other materials for painting and cleaning that are classified under applicable laws as hazardous chemicals and substances.
If we are found not to comply with any of these rules, regulations, or permits, we may be subject to fines, remediation expenses,
and the obligation to change our business practice, any of which could result in substantial costs that would adversely affect
our business operations and financial condition.
We
may be subject to fines and disqualification for non-compliance with Federal Aviation Administration (“FAA”) regulations.
We
are subject to regulation by the FAA under the provisions of the Federal Aviation Act of 1958, as amended. The FAA prescribes
standards and licensing requirements for aircraft and aircraft components. We are subject to inspections by the FAA and may be
subjected to fines and other penalties (including orders to cease production) for noncompliance with FAA regulations. Our failure
to comply with applicable regulations could result in the termination of or our disqualification from some of our contracts, which
could have a material adverse effect on our operations and financial condition.
Most
of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services that we must provide
provide to our customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the
quality and timeliness
of work performed by the subcontractor, customer concerns about the subcontract, our failure to extend
existing task orders or issue
new task orders under a subcontract, our hiring of personnel of a subcontractor, or disputes concerning
payment. A failure by one or
more of our subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or
perform the agreed-upon services may
materially and adversely affect our ability to fulfill our obligations as the prime contractor.
Subcontractor performance deficiencies
could result in a customer eliminatingsuspending or limiting our ability to progress bill or terminate our contract
for default. A prohibition on
progress billing may have an adverse effect upon our cash flow and profitability and a default termination
could expose us to liability
and have a material adverse effect on our ability to compete for future contracts and orders. In
addition, a delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our
customers’ needs and may have a material adverse effect upon our profitability.
We are subject to intense competition for the services of skilled technicians necessary to manufacture our products. The demand for these individuals may increase as other manufacturers seek to bring to the U.S. manufacturing processes currently outsourced overseas. Continued inflationary pressures may increase our labor costs which could have a material adverse effect on our business, financial condition, and results of operations.
Operating
margin is adversely affected when contract costs that cannot be billed to customers are incurred. This cost growth can occur if
estimates to complete a contract increase due to technical challenges or if initial estimates used for calculating the contract
price were incorrect. The cost estimation process requires significant judgment and expertise. Reasons for cost growth may include
unavailability and productivity of labor, the nature and complexity of the work to be performed, the effect of change orders,
the availability and cost of materials, the effect of any delays in performance, availability, and timing of funding from the
customer, natural disasters, pandemics, and the inability to recover any claims included in the estimates to complete. A significant
increase in cost estimates on one or more programs could have a material adverse effect on our financial position or results of
operations.
We
primarily recognize revenue from our contracts over the contractual period pursuant to ASC 606. Pursuant to ASC 606, revenue and
gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs
at the completion of the contract. Recognized revenues that will not be billed under the terms of the contract until a later date
are recorded on our consolidated balance sheet as an asset captioned “Contract assets.” Contracts where billings to
date have exceeded recognized revenues are recorded on our consolidated balance sheet as a liability captioned “Contract
liabilities.” Changes to the original estimates may be required during the term of the contract. Estimates are reviewed
quarterly and the effect of any change in the estimated gross margin percentage for a contract is reflected in the consolidated
financial statements for the period the change becomes known. ASC 606 requires the use of considerable estimates in determining
revenues and profits and in assigning the amounts to accounting periods. As a result, there can be a significant disparity between
earnings (both for accounting and taxes) as reported and actual cash received by us during any reporting period.
We
continually evaluate all the issues related to the assumptions, risks and uncertainties inherent with the application of ASC 606;
however, there is no assurance that our estimates will be accurate. If our estimates are not accurate or a contract is terminated,
we will be forced to adjust revenue in later periods. Furthermore, even if our estimates are accurate, we may have a shortfall
in our cash flow and we may need to borrow money to pay for costs until the reported earnings materialize to actual cash receipts.
Cybersecurity incidents, system failures and technological changes, including developments in machine learning and generative artificial intelligence, could adversely affect our business and operations.
Our operations depend on the reliability and security of our information technology systems and those of our suppliers, customers and third-party service providers. Cybersecurity threats and system failures could disrupt our operations, impair our ability to manufacture and deliver products, or compromise sensitive information related to our business, customers or suppliers. Cybersecurity threats continue to evolve and include, among other things, malicious software, phishing attacks, ransomware and other unauthorized attempts to access or disrupt information systems. These threats may originate from a variety of sources, including cybercriminals, nation-state actors, insiders or other third parties. Because the techniques used by attackers change frequently and may not be recognized until they are deployed, we may be unable to anticipate or prevent all such attacks.
In addition, our operations could be disrupted by failures of network, software or hardware systems, including failures affecting our systems or those of third-party service providers, as well as by natural disasters, power outages or other operational disruptions. Any cybersecurity incident or system failure could result in the loss or compromise of sensitive information, interruptions in our operations, delays in product delivery, remediation costs, regulatory scrutiny, litigation or reputational damage.
We also face risks associated with technological change, including the increasing use of machine learning and generative artificial intelligence technologies in business operations. The adoption of new technologies may introduce operational, cybersecurity, intellectual property, regulatory or reputational risks.
Although we implement cybersecurity and information technology safeguards designed to protect our systems and data, these measures may not be sufficient to prevent or mitigate all cybersecurity incidents or system disruptions. Any such events could materially adversely affect our business, financial condition and results of operations.
We are required to comply with extensive and frequently changing environmental regulations at the federal, state, and local levels. Among other things, these regulatory bodies impose restrictions to control air, soil, and water pollution, to protect against occupational exposure to chemicals and to require notification or reporting of the storage, use, and release of certain hazardous substances into the environment. This extensive regulatory framework imposes significant compliance burdens and risks on us. In addition, these regulations may impose liability for the cost of removal or remediation of certain hazardous substances released on or in our facilities without regard to whether we knew of, or caused, the release of such substances. Furthermore, we are required to provide a place of employment that is free from recognized and preventable hazards that are likely to cause serious physical harm to employees, provide notice to employees regarding the presence of hazardous chemicals and to train employees in the use of such substances. Our operations require the use of a limited amount of chemicals and other materials for painting and cleaning that are classified under applicable laws as hazardous chemicals and substances. If we are found not to comply with any of these rules, regulations, or permits, we may be subject to fines, remediation expenses, and the obligation to change our business practice, any of which could result in substantial costs that would adversely affect our business operations and financial condition.
We must maintain certain approvals, qualifications and certifications to manufacture products for our customers.
Our customers and regulatory authorities may require us to maintain certain approvals, qualifications or certifications to manufacture and supply assemblies used in aerospace and defense applications. These approvals may require ongoing compliance with quality, manufacturing and documentation standards. If we fail to maintain required approvals or certifications, or if we are unable to obtain approvals for new programs or products, we could lose existing business or be unable to compete for future opportunities.
We may be subject to fines and disqualification for non-compliance with Federal Aviation Administration regulations.
We are subject to regulation by the Federal Aviation Administration (“FAA”). The FAA prescribes standards and licensing requirements for aircraft and aircraft assemblies. We are subject to inspections by the FAA and may be subjected to fines and other penalties (including orders to cease production) for noncompliance with FAA regulations. Our failure to comply with applicable regulations could result in the termination of or our disqualification from some of our contracts, which could have a material adverse effect on our operations and financial condition.
We
are subject to intense competition for the services of skilled technicians necessary to manufacture our products. The demand for
these individuals may increase as other manufacturers seek to bring to the U.S. manufacturing processes currently outsourced overseas.
If the U.S. economy continues to undergo a period of inflation, our labor costs may increase which could have a material adverse
effect on our business, financial condition, and results of operations.
Our
business may be affected by certain characteristics and trends of the commercial aerospace industry or general economic conditions
that affect our customers, such as the current inflationary and high interest rate environment in the U.S. and the resultant impacts
on the supply chain, the labor market and the general economy, as well as fluctuations in the aerospace industry’s business
cycle, varying fuel and labor costs, intense price competition and regulatory scrutiny, certain trends, including a possible decrease
in aviation activity and a decrease in outsourcing by aircraft manufacturers, or the failure of projected market growth to materialize
or continue. If these characteristics and trends adversely affect customers in the commercial aerospace industry, they may reduce
the overall demand for our products.
Our
working capital requirements may negatively affect our liquidity and capital resources.
Our
working capital requirements can vary significantly, depending in part on the timing of new program awards and the payment terms
with our customers and suppliers. If our working capital needs exceed our cash flows from operations, we would look to our cash
balances and any availability for borrowings under our credit facility to satisfy those needs. See “Risks Related to Our
Indebtedness and Liquidity” below.
New
programs with new technologies typically carry risks associated with design changes, development of new production tools, increased
capital and funding commitments, ability to meet customer specifications, delivery schedules and unique contractual requirements,
supplier performance, ability of the customer to meet its contractual obligations to us, and our ability to accurately estimate
costs associated with such programs. In addition, any new program may not generate sufficient demand or may experience technological
problems or significant delays in the regulatory or other certification or manufacturing and delivery schedule. If we were unable
to perform our obligations under new programs to the customer’s satisfaction, if we were unable to manufacture products
at our estimated costs, or if a new program in which we had made a significant investment was terminated or experienced weak demand,
delays, or technological problems, then our business, financial condition and results of operations could be materially adversely
affected. This risk includes the potential for default, quality problems, or inability to meet specifications, as well as our
inability to negotiate final pricing for program changes and could result in low margin or forward loss contracts, and the risk
of having to write-off contract assets if they were deemed to be unrecoverable. In addition, beginning new work on existing programs
also carries risk associated with the transfer of technology, knowledge, and tooling.
To
perform on new programs, we may be required to expend up-front costs which may not have been negotiated in our selling price.
Additionally, we may have made margin assumptions related to those costs, that in the case of significant program delays and/or
program cancellations, or if we are not successful in negotiating favorable margin on scope changes, could cause us to experience
margin degradation which may be material, for costs that are not recoverable. Such charges and the loss of up-front costs could
have a material adverse impact on our liquidity.
Our business may be affected by certain characteristics and trends of the commercial aerospace industry or general economic conditions that affect our customers, such as the inflationary and interest rate environment in the U.S. and the resultant impacts on the supply chain, the labor market and the general economy, as well as fluctuations in the aerospace industry’s business cycle, varying fuel and labor costs, intense price competition and regulatory scrutiny, certain trends, including a possible decrease in aviation activity and a decrease in outsourcing by aircraft manufacturers, or the failure of projected market growth to materialize or continue. If these characteristics and trends adversely affect customers in the commercial aerospace industry, they may reduce the overall demand for our products.
Cyber
security attacks, internal system or service failures and technological changes, including the use of machine learning and generative
artificial intelligence, may adversely impact our business and operations.
Any
system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated
and appropriately mitigated, could disrupt our business, and impair our ability to effectively provide products and related services
to our customers and could have a material adverse effect on our business. We could also be subject to systems failures, including
network, software, or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses,
natural disasters, power shortages, or terrorist attacks. Cyber security threats are evolving and include, but are not limited
to, malicious software, phishing, and other unauthorized attempts to gain access to sensitive, confidential, or otherwise protected
information related to us or our products, customers, or suppliers, or other acts that could lead to disruptions in our business.
Because the techniques used by cyber-attackers to access or sabotage networks change frequently and may not be recognized until
launched against a target, we may be unable to anticipate these tactics. Any such failures to prevent or mitigate cyber-attacks
could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, or subject us to claims
and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt
or suspend our operations or otherwise adversely affect our business. Although we utilize various procedures and controls to monitor
and mitigate the risk of these threats, including contracting with an outside cyber security firm to provide constant monitoring
of our systems, and training our employees to recognize attacks, there can be no assurance that these procedures and controls
will be sufficient. Our property and business interruption insurance may be inadequate to compensate us for all losses that may
occur because of any system or operational failure or disruption which could adversely affect our business, results of operations,
and financial condition. Moreover, expenditures incurred in implementing cyber security and other procedures and controls could
adversely affect our results of operations and financial condition.
Our
ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience
an “ownership change”.
As
of December 31, 2024, we had approximately $66.0 million of gross net operating losses (“NOLs”) for federal tax purposes
and approximately $18.0 million of post-apportionment NOLs for state tax purposes. As a result of the Tax Cuts and Jobs Act of
2017 and the Coronavirus Aid, Relief, and Economic Security Act of 2020, NOLs arising before January 1, 2018, and NOLs arising
after January 1, 2018, are subject to different rules. Our pre-2018 NOLs totaled approximately $51.6 million; these NOLs will
expire in varying amounts from 2034 through 2037, if not utilized, and can offset 100% of future taxable income for regular tax
purposes. Our NOLs arising in 2018, and later years can be carried forward indefinitely
and can offset up to 80% of future taxable income.
Our
ability to fully recognize the benefits from our NOLs is dependent upon our ability to generate sufficient income prior to their
expiration. In addition, our NOL carryforwards may be limited if we experience an ownership change as defined by Section 382 of
the Internal Revenue Code (“Section 382”). In general, an ownership change under Section 382 occurs if 5% shareholders
increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a
relevant lookback period. The company completed a section 382 analysis for the year ended
December 31, 2024 and believes that no ownership change occurred during the relevant lookback period through December 31, 2024
that would limit our ability to use our NOLs.
Management's Discussion & Analysis (MD&A)
New heading “Western Alliance Bank Loan and Security Agreement”
Removed heading “Income before provision for income taxes”
Removed heading “BankUnited Facility”
Largest changes
“On November 13, 2024, the Company entered into a Fourteenth Amendment to the Credit Agreement (the “Fourteenth Amendment”). …”see in full comparison
“In connection with entering into the Loan and Security Agreement, the Company used a portion of the proceeds of the Credit Facilities, including the full amount of the Term Loan and borrowings under the Revolving Line in the amount of $6,220,722 to repay in full all outstanding obligations under that certain Amended and Restated Credit Agreement, dated as of March 24, 2016, (as amended), among the Company, the several lenders from time to time parties thereto and BankUnited, N.A., as sole arranger, administrative agent and collateral agent (the “BankUnited Credit Agreement”). …”see in full comparison
see in full comparisonOurManagementworking capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new program awards and the payment terms with our customers and suppliers. There is currently no availability for borrowings under the BankUnited Facility and the Company finances its operations from internally generated cash flow. Note 8 to our consolidated financial statements included in Part II - Item 8 includes a discussion regarding the BankUnited Facility and recent amendments thereto which provide, among other things, for increases in principal payments and the interest rate on the loans provided for therein. Managementhas (i) negotiated and executed a further amendment to the Credit Agreement which extended the maturity date of the Credit Agreement to August 31, 2026, (ii) obtained and regularly seeks additional progress payment and advance payment customer contract funding provisions, (iiiii) maintained procedures to minimize investments in inventory and contract assets, (iviii) remained focused on its military customer base and (viv) maintained its approximately$85.0$91.8 million backlog of funded orders, 97% of which are for military programs. Basedupononthe aforementionedthese factors,it is management’s estimation thatmanagement believe therewillarelikely not be any individualno conditions orcombination ofeventsthatcurrentlywill occuranticipated in the coming yearwhichthat would cause the Company to be unable to meet its obligations or otherwise continue as a going concern. However, there can be no assurance thatsuchthese plans willaccomplishachieve their intendedgoals.results.
Full comparison: every changed paragraph (42)
On December 12, 2025, the Company entered into the Loan and Security Agreement with Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10.0 million (the “Revolving Line”) and a term loan in the original principal amount of $10.0 million (the “Term Loan” and, together with the Revolving Line, the “Credit Facilities”).
In connection with entering into the Loan and Security Agreement, the Company used a portion of the proceeds of the Credit Facilities, including the full amount of the Term Loan and borrowings under the Revolving Line in the amount of $6,220,722 to repay in full all outstanding obligations under that certain Amended and Restated Credit Agreement, dated as of March 24, 2016, (as amended), among the Company, the several lenders from time to time parties thereto and BankUnited, N.A., as sole arranger, administrative agent and collateral agent (the “BankUnited Credit Agreement”). Upon such repayment, the BankUnited Credit Agreement and the related loan documents were terminated in accordance with their terms, and all liens and security interests securing the obligations thereunder were released. The Company did not incur any early termination or prepayment penalties in connection with the termination of the BankUnited Credit Agreement.
On November 13, 2024, the Company entered into
a Fourteenth Amendment to the Credit Agreement (the “Fourteenth Amendment”). Under the Fourteenth Amendment, the parties
amended the Credit Agreement by: (i) extending the maturity date of the Company’s existing revolving line of credit (the
“Revolving Credit Loans”) to August 31, 2026; (ii) reducing the Base Rate Margin (as defined in the Credit Agreement)
from 3.50% to 2.0%; (iii) resetting the aggregate maximum principal amount of all Revolving Credit Loans to $16,890,000 from
January 1, 2025 through March 31, 2025, $16,140,000 from April 1, 2025 through June 30, 2025, $15,390,000 from July
1, 2025 through September 30, 2025, $14,640,000 from October 1, 2025 through December 31, 2025, $13,890,000 from
January 1, 2026 through March 31, 2026, $13,140,000 from April 1, 2026 through June 30, 2026, and $12,390,000 from
July 1, 2026 onward and for payments to be made by the Company to comply therewith (if any such payments are necessary), on
the first day of each such period; and (iv) requiring the Company, if it does not deliver to BankUnited, N.A. by December 31, 2025,
a commitment letter with banks and terms and conditions reasonably acceptable to the Lenders for refinancing the obligations under
the Credit Agreement, to make a payment by January 31, 2026, equal to 2% of the aggregate outstanding principal amount of
the Revolving Credit Loans as of December 31, 2025, with 50% of such payment applied to reduce the aggregate outstanding principal
and the remaining 50% retained by the Lenders as an amendment fee with respect to the Fourteenth Amendment.
We
are engaged in the contract production
of structural aircraft assemblies for fixed wing aircraft and helicopters in both the commercial
and defense markets. We also have
a strong and growing presenceparticipate in the aerosystems sector of the market, withthrough our production of various reconnaissance pod structures
and fuel panel
systems. Within the global aerostructureaerostructures and aerosystemaerosystems supply chain, we are either a Tier 1 supplier to aircraft
OEMs or a Tier 2
subcontractor to major Tier 1 manufacturers. We also are a prime contractor to the U.S. DOD, primarily the USAF.
In conjunction with
our assembly operations, we provide engineering, program management, supply chain management and kitting, and
MRO services.
In
accordance with ASC 606, the Company
recognizes revenue when it transfers control of a promised good or service to a customer in an amount
that reflects the consideration
it expects to be entitled to in exchange for the good or service. The majority of the Company’s
performance obligations are
satisfied over time as the Company (i) sells products with no alternative use to the Company and (ii) has
an enforceable right
to recover costs incurred plus a reasonable profit margin for work completed to date. UnderThe theapplication overof timethis revenuemethod
requires recognitionmanagement model,
revenueto make estimates of total contract costs and grossprogress profit are recognized over the contract period as work is performed based on actual costs incurred and an estimate
of costs to complete and resulting total estimated costs attoward completion. See Part II, Item 8, Note 1 “Principal Business Activity
and Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in this Form
10-K for additional information regarding the Company’s revenue recognition policy.
Under the over-time revenue recognition model, revenue and gross profit are recognized over the contract period as work is performed based on the relationship of actual costs incurred to total estimated costs at completion (the cost-to-cost method). These estimates are reviewed periodically as work progresses and adjustments to estimated costs may affect the timing and amount of revenue and gross profit recognized. See Part II, Item 8, Note 1, “Principal Business Activity and Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included in this Form 10-K for additional information regarding the Company’s revenue recognition policy.
On
a quarterly basis, we assess the likelihoodrealizability that we will be able to recoverof our deferred tax assets against future sources of taxable
income and reduce the carrying amounts of deferred tax assets by recordingrecord a valuation
allowance if, based on the available evidence,
it is more likely than not (defined as a likelihood of more than 50%) that all or a portion
of suchthe deferred tax assets will not be realized.
In assessing the need for a valuation allowance, the Company evaluates both positive and negative evidence regarding the realizability of deferred tax assets, including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning strategies. Greater weight is generally given to objectively verifiable evidence, such as cumulative losses in recent years, which may represent significant negative evidence regarding realizability.
Assessing the realizability of deferred
tax assets requires the determination of whether it is more likely than not that some portion or all the deferred tax assets will
not be realized. In assessing the need for a valuation allowance, the Company considers all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, loss carryback and tax-planning
strategies. Generally, more weight is given to objectively verifiable evidence, such as a cumulative loss in recent years, as a
significant piece of negative evidence to overcome. For the period ended December 31, 2023, the Company achieved three years of
cumulative book and taxable income, along with projections of profitability, for which management determined that there was sufficient
positive evidence to conclude that it is more likely than not that a portion of the deferred tax assets will be realized. As such,
$14,170,891 of the valuation allowance was released during the fourth quarter of 2023. During 2024 the Company continued to assess
its ability to realize its deferred tax asset. The Company continued to be profitable in 2024 and there was no significant change
to the Company’s forecast of income or its ability to realize the deferred tax asset at December 31, 2024. The increase of
$404,224 is most significantly related to the state valuation allowance.
Revenue for the year ended December 31,
2024 2025 was $81,078,864
$69,262,124 compared to $86,466,321$81,078,864 for the year ended December 31, 2023,2024, representing a decrease of $5,387,457,$11,816,740, or 6.2%.14.6%. The
decrease was driven primarily relatedby toan variousunfavorable programscontract thatadjustment neared completion in 2024 including NGC E-2D and Sikorsky HIRRS programs
coupledassociated with the timingtermination of workthe performedBoeing A-10 Main Landing Gear
Pods program, and lower revenue recognized on the LockheedT-38 MartinPacer F-16Classic program.program, These decreases were partlypartially offset
by bythe commencement of the L3Harris NGJ MidLow-Band Band
productionPods and Sikorsky Welded Tubes.program.
Revenue
generated from prime government
contracts for the year ended December 31, 20242025 was $11,677,152$7,415,434 compared to $11,842,145$11,677,152 for the year ended
December 31, 2023,2024, a
slight decrease of $164,993,$4,261,718, or 1.4%.36.5%. This decrease isprimarily thereflects result of decreasedlower revenue recognized on the T-38 Pacer Classic
program.
Revenue generated from government subcontracts
for the year ended December 31, 2024 was $64,704,370 compared to $69,672,602 for the year ended December 31, 2023, a decrease of
$4,968,232, or 7.1%. The decrease was primarily related to various programs that neared completion
in 2024 including NGC E-2D and Sikorsky HIRRS programs coupled with the timing of work performed on the Lockheed Martin F-16 program.
These decreases were partly offset by NGJ Mid Band production and Sikorsky Welded Tubes.
Revenue
generated from commercialgovernment contracts
for the year ended December 31, 2024 was $4,697,342 compared to $4,951,574subcontracts for the year ended December 31, 2023,2025 was $55,547,679 compared to $64,704,370 for the year ended
December 31, 2024, a decrease of
$254,232 $9,156,691, or 5.1%.14.2%. The decrease inwas revenueprimarily resultedrelated fromto decreasedan
unfavorable revenuecontract recognizedadjustment onassociated with the timingtermination of work performed on the Embraer
PhenomBoeing 300A-10 InletMain Landing Gear Pods program.
Revenue generated from commercial contracts for the year ended December 31, 2025 was $6,299,011 compared to $4,697,342 for the year ended December 31, 2024, an increase of $1,601,669 or 34.1%. The increase in revenue was primarily driven by the commencement of production on our Embraer Phenom-100 Engine Inlet Assemblies and Collins Compac Enclosures programs.
Cost
of sales for the year ended December
31, 20242025 was $63,840,803$58,706,055 compared to $69,400,693$63,840,803 for the year ended December 31, 2023,2024, representing
a decrease of $5,559,890$5,134,748 or 8.0%.
Procurement
for the year ended December
31, 20242025 was $40,100,196$36,588,501 compared to $46,020,628$40,383,090 for the year ended December 31, 2023,2024, a decrease of $5,920,432 $3,794,589
or 12.9%.9.4%. This
decrease iswas driven primarily by the resulttermination of a decrease in procurement for the NGCBoeing E-2DA-10 MYPMain IILanding OWP program, Sikorsky HIRRS program, USAF
T-38 Pacer Classic Structural Modification Kits program, offset by an increase in our Raytheon NGJ – Mid BandGear Pods program
and Sikorsky Welded Tubes.program.
Labor
costs for the year ended December
31, 2024 were $7,303,563 compared to $7,054,308 for the year ended December 31, 2023,2025 anwere increase$5,924,180 compared to $7,303,563 for the year ended December 31, 2024, a decrease
of $1,379,383 or 18.9%. The decrease was primarily driven by the termination of $249,255 or 3.5%. The increase
is primarily the resultBoeing A-10 Main Landing Gear Pods program
and timing of work performed on the BoeingF-16 A-10Rudder program,Island offset by decreases on our Raytheon NGJ – Mid Band
Pods program due to efficiencies.program.
Other cost of sales relates to items that
can increase or decrease cost of sales such as changes in inventory levels, changes in inventory valuation, changes to inventory
reserves, changes in loss contract provisions and direct charges to cost of sales. For the year ended December 31, 2024, there
were costs in the amount of $282,894 compared to $297,617 for the year ended December 31, 2023, a decrease of $14,723 or 4.9%.
Gross
profit for the year ended December
31, 2024 was $17,238,061 compared to $17,065,628 for the year ended December 31, 2023,2025 anwas increase$10,556,069 compared to $17,238,061 for the year ended December 31, 2024, a decrease
of $172,433$6,681,992 or 1.0%.38.8%. Gross profit
percentage (“gross margin”) for the year ended December 31, 20242025 was 15.2% compared
to 21.3% comparedfor to 19.7% forthe year ended December
31, 2023.2024.
During
the years ended December 31, 2024
2025 and 2023,2024, we made changes in estimates to various contracts. Such changes in estimates resulted in changes in total gross profit
as net unfavorable adjustments to gross profit totaling $3,750,020$10,171,038 and 1,450,502$3,750,020 for the years ended December 31, 20242025 and December 31,
2024. 2023.The decrease was primarily related to an unfavorable contract adjustment associated with the termination of the Boeing A-10 Main
Landing Gear Pods program.
Selling,
general and administrative expenses
(“SG&A”) for the year ended December 31, 20242025 were $10,506,439$10,732,451 compared to $10,758,624$10,506,439
for the year ended December 31, 2023,2024, aan decreaseincrease of $252,185$226,012 or 2.3%.2.2%. The decreaseincrease was primarily due to a reduction of consulting
andhigher legal feefees partially
offset by a decrease in office expenses.
Interest
expense for the year ended December
31, 2024 was $2,288,834, compared to $2,455,214 for the year ended December 31, 2023,2025 was $1,567,840, compared to $2,288,834 for the year ended December 31, 2024, a decrease
of $166,380$720,994 or 6.8%.31.5%. The decrease
is was the result of alower year-over-yearaverage decreaseoutstanding indebt balances, lower interest rates during 2025, and the amount
refinancing of our outstandingprior debtcredit underfacility the Credit Agreement coupled withat a lower
year-over-year interest rates charged.rate.
Income before provision for income
taxes
Income(Loss)
income before provision for income taxes (Loss)
income before provision for theincome year ended December 31, 2024 was $4,442,788 compared to $3,851,790taxes for the year ended December 31, 2023,2025 anwas increase$(1,744,222) compared to $4,442,788 for the year ended
December 31, 2024, a decrease of
$590,998 $6,187,010 or 15.3%.139.3%. The increasedecrease was driven by the aforementioned increasedecrease in gross profit discussed above and decreasesthe
increase in both SG&AA, andpartially offset by the decrease in interest
expense described above.
The income tax (benefit) for the year ended December 31, 2025 was $(900,861), which was an effective tax (benefit) rate of (51.6%), as compared to income tax expense of $1,143,454 for the year ended December 31, 2024, which was an effective tax rate of 25.7%. The income tax benefit recorded in 2025 was primarily due to the application of federal and state statutory tax rates and an increase in the income tax benefit attributable to the research and development credit. The income tax expense recorded in 2024 was primarily due to the application of federal and state statutory tax rates, partially offset by a decrease in income tax expense attributable to the research and development credit.
The income tax (benefit) for the year ended
December 31, 2024 was $1,143,454, which was an effective tax (benefit) rate of 25.7%, as compared to the income tax (benefit) of
($13,349,414) for the year ended December 31, 2023, which was an effective tax (benefit) rate of (346.6%). The income tax recorded
in 2024 and income tax benefit realized in 2023 was primarily due to federal and state statutory rates in 2024 and the reduction
of the Company’s deferred tax asset valuation allowance recorded by the Company in the fourth quarter of 2023, respectively.
Net (loss) income
Net
(loss) income for the year ended December
31, 2024 was $3,299,334 compared to $17,201,204 for the year ended December 31, 2023,2025 was $(843,361) compared to $3,299,334 for the year ended December 31, 2024, a decrease
of $13,901,870$4,142,695 or 80.8%.125.6%. The decrease
in net income was driven primarily by the 2023reduction in gross margin related to an unfavorable contract
adjustment associated with the termination of the Boeing A-10 Main Landing Gear Pods program, partially offset by lower interest expense
and the income tax benefit.
Earnings(Loss)
earnings per share
Basic
(loss) earnings per share was $0.26$(0.07) for
the year ended December 31, 20242025 calculatingcalculated utilizingusing 12,593,21312,788,937 weighted average shares outstanding as outstanding,
compared to $1.40$0.26 for
the year ended December 31, 20232024, calculated utilizingusing 12,311,21912,593,213 weighted average shares outstanding, anrepresenting
a decrease of $1.14$0.33 per
share, or 81.4%.126.9%. Diluted earnings (loss) per share was $(0.07) for the year ended December 31, 2025 calculated
using 12,788,937 weighted average shares outstanding compared to $0.26 for the year ended December 31, 2024 calculated utilizingusing 12,709,237
weighted weighted
average shares outstanding as compared to $1.38 for the year ended December 31, 2023 calculated utilizing 12,471,961 weighted average
shares outstanding, anrepresenting a decrease of $1.12$0.33 per share, or 81.2%.126.9%. DecreaseThe decrease in the basic and diluted earnings
per share arewas duedriven to the
reduction of the Company’s deferred tax asset valuation allowance recordedprimarily by the Companyunfavorable inadjustment associated with the fourth quartertermination of
the 2023Boeing which
favorablyA-10 impactedMain 2023Landing byGear $1.12Pods per share.program.
At
December 31, 2024,2025, we had working capital
of $17,122,111$20,388,755 compared to working capital of $15,402,381$17,122,111 at December 31, 2023,2024, an increase
of $1,719,730,$3,266,644, or 11.2%.19.1%. The increase is
primarily the result of an increase in net contract assets and a decrease to accrued expenses offset by decreases in accountsaccrued receivable
and inventory, and an increase in accounts payable.expenses.
A
large portion
of our cash is used to pay for materials and processing costs associated with contracts that are in process and which do
not provide
for progress payments. Costs for which we are not able to bill on a progress basis are componentsmade up of contract assets on our
consolidated consolidated
balance sheet and represent the aggregate costs and related earnings for uncompleted contracts for which the customer has
not yet
been billed. These costs and earnings are recovered upon shipment of products and presentation of billings in accordance with
contract contract
terms.
Because
ASC 606 requires us to use estimates
in determining revenues, costs and profits and in assigning thethose amounts to accounting periods,
there can be a significant disparity
between earnings (both for accounting and tax purposes) as reported and the actual cash that we receive during any reporting period. Accordingly,
Accordingly, it is possible that we mayexperience have a shortfallshortfalls in our cash flow and may need to borrow money or take steps to deferdelay certain cash outflows
outflows until the reported earnings materialize into actual cash receipts.
At
December 31, 2025, our cash balance was $899,199 compared to $5,490,963 at December 31, 2024, oura cash balance
was $5,490,963 compared to $5,094,794 at December 31, 2023, an increasedecrease of $396,169$4,591,764 or 7.8%.83.6%. The increase
decrease was driven by $3,558,935
$(5,200,025) in cash providedused by operations,operations partlyincluding $1,979,189 increase in accounts receivable and a $1,638,161
increase in prepaid expenses and other current assets, $(65,036) used for the purchase of equipment, partially offset by ourproceeds
from payfinancing downactivities of outstanding debt during 2024 of $2,694,498 and purchase of equipment
of $403,854.$673,297.
Western Alliance Bank Loan and Security Agreement
BankUnited Facility
This
information is set forth in Note 8
to ourthe Consolidatedconsolidated Financialfinancial Statements,statements, appearingwhich appears following Item 15 of this Annual Report on
Form 10-K whichand is herebyincorporated incorporated
herein by reference.
This
information is set forth in Note 9
to ourthe Consolidatedconsolidated Financialfinancial Statements,statements, appearingwhich appears following Item 15 of this Annual Report on
Form 10-K whichand is herebyincorporated incorporated
herein by reference.
Our working capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new program awards and the payment terms with our customers and suppliers. There is currently availability for borrowings under the Western Alliance Bank Loan and Security Agreement, and the Company finances its operations primarily from internally generated cash flow. Note 8 to the consolidated financial statements included in Part II – Item 8 contains additional information regarding the Western Alliance Bank Loan and Security Agreement.
OurManagement
working capital requirements can vary significantly, depending in part on the timing of the conclusion of mature programs and new
program awards and the payment terms with our customers and suppliers. There is currently no availability for borrowings under
the BankUnited Facility and the Company finances its operations from internally generated cash flow. Note 8 to our consolidated
financial statements included in Part II - Item 8 includes a discussion regarding the BankUnited Facility and recent amendments
thereto which provide, among other things, for increases in principal payments and the interest rate on the loans provided for
therein. Management has (i) negotiated and executed a further amendment to the Credit Agreement which extended the maturity date
of the Credit Agreement to August 31, 2026, (ii) obtained and regularly seeks additional progress payment and advance payment customer
contract funding provisions, (iiiii) maintained
procedures to minimize investments in inventory and contract assets, (iviii) remained
focused on its military customer base and (viv) maintained
its approximately $85.0$91.8 million backlog of funded orders, 97% of which
are for military programs. Based uponon the aforementionedthese factors, it is management’s estimation thatmanagement
believe there willare likely not
be any individualno conditions or combination of events thatcurrently will occuranticipated in the coming year whichthat would cause the Company to be unable
to meet
its obligations or otherwise continue as a going concern. However, there can be no assurance that suchthese plans will accomplish
achieve their intended goals.
results.
The
table below summarizes information
about our contractual obligations as of December 31, 20242025 and the effects these obligations are expected
to have on our liquidity
and cash flow in the future years.periods.
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, chains, labor markets and general economic conditions, are factors that the Company actively monitors in an attempt
effort to mitigate
and manage potential negative impacts on and risks faced byto the Company. The majority of the Company’s long termlong-term contracts with
with its customers and suppliers reflect fixed pricing. When bidding for
work, the Company takes inflation risk and supply sidesupply-side pricing risk
into account inwhen preparing its proposals.
What changed in the latest 10-Q
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.
Full comparison: every changed paragraph (1)
“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.
Management's Discussion & Analysis (MD&A)
New heading “Provision (Benefit) for Income Taxes”
Removed heading “Forward Looking Statements”
Removed heading “Provision/(Benefit) for Income Taxes”
Removed heading “Shelf Registration Statement and At-the-Market Offering Program”
Largest changes
“Shelf Registration Statement and At-the-Market Offering Program”see in full comparison
We believe that our existingsee in full comparisonliquidityresources as ofMarchJune31,30, 2026 will be sufficient to meet our current working capital needs for at leastleastthe 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.ToIftheourextentworkingadditionalcapitalliquidityneedsis required, we may utilizeexceed our cashbalances,flows from operations, we would look to our cash balances and availability for borrowings under ourcreditborrowingfacilities andarrangementotherto satisfy those needs, as well as potential sources ofliquidity, including our existing shelf registration statement and at-the-market offering program, although suchadditionalliquiditycapital, which may not be available on satisfactory terms and in adequate amounts, if at all.
“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.”see in full comparison
Full comparison: every changed paragraph (65)
Forward
Looking Statements
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”).
We
are engaged in the contract production of structural aircraft assemblies for fixed wing aircraft and helicopters in both the
commercial 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 aircraft
OEMs or a Tier 2 subcontractor to major Tier 1 manufacturers. We also are a prime contractor to the U.S. DOD,Department of Defense,
primarily the USAF.
United States Airforce “USAF”. In conjunction with our assembly operations, we provide engineering,
program management, supply chain management and kitting,
and MRO services.
We
produce custom assemblies pursuant to long-term contracts and customer purchase orders. Funded backlog consists of theaggregate aggregatefunded
funded value of remaining performance obligationsvalues under such contracts and purchase orders, excluding the portion previously included
in operating revenues pursuant to Accounting
Standards Codification Topic 606 (“ASC 606”). Unfunded backlog is the
estimated amount of future orders under the
expected duration of the program.programs. Substantially all of our unfunded backlog is subject
to termination at will and rescheduling, without
significant penalty. Funds are often appropriated for programs or contracts on
a yearly or quarterly basis, even though the contract
may call for performance that is expected to take a number of years. Therefore,
our funded backlog does not include the full value
of our contracts.
Our
total backlog as of MarchJune 31,30, 2026 and December 31, 2025 is shown below.
Approximately
96%95% of the total amount of our backlog at MarchJune 31,30, 2026 was attributable to government and military contractor contracts. Our
backlog attributable to government contracts at MarchJune 31,30, 2026 and December 31, 2025 was as follows:
Our
backlog attributable to commercial contracts at MarchJune 31,30, 2026 and December 31, 2025 was as follows:
The
total backlog at MarchJune 31,30, 2026 is primarily comprised of long-term programs with Raytheon (Next Generation Jammer-MidNGJ-Mid Band Pods
and Advanced Tactical Pods), L3Harris (Next Generation Jammer-LowNGJ-Low Band Pods), LockheedRaytheon Martin (F-16 RI/DCC’s), Raytheon
(B-52 Radar Racks) Lockheed Martin (F-16
RI/DCC’s), Sikorsky (UH-60MH-60 BLACKHAWKSeahawk Stabilator MRO) and USAFSikorsky (T-38CH-53K ClassicWelded Structural Modification KitsTubes).
The
funded backlog at MarchJune 31,30, 2026 is primarily from purchase orders under long-term contracts with Raytheon (NGJ – MidNGJ-Mid Band
Pods and Advanced Tactical Pods), USAF (T-38 Classic Structural Modification Kits), and Lockheed MartinL3Harris (F-16NGJ-Low RI/DCC’sBand
Pods).
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 MarchJune 31,30, 2026.
Total
Revenue for the
three months ended MarchJune 31,30, 2026 was $17,359,940$17,581,532 compared to $15,400,608$15,179,108 for the same period last year, an increase
of $1,959,332$2,402,424 or
12.7%. The increase was15.8%, driven primarily by favorableour adjustmentsRTX onMPBD Missile Wing program, our NGJ – Mid
Band Pods
and Advanced Tactical Pods program and our NGJ – Low Band Pods program, partially offset by unfavorableour adjustmentsSikorsky toMH-60
Seahawk Stabilator MRO program, and our F-16Sikorsky RI/DCC’s
programHover andInfrared EmbraerReduction Phenom-300System Engine Inlet Assemblies(HIRRS) program.
Total
Revenue from military subcontracts was $14,678,977
for the threesix months ended MarchJune 31,30, 2026 was $34,941,472 compared to $11,326,608$30,579,716 for the threesame monthsperiod endedlast March 31, 2025,year, an increase
of $3,352,369
$4,361,756 or 29.6%. The increase was14.3%, driven primarily by favorable adjustments on 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 prime government military contracts was
$1,764,056subcontracts for the three months ended MarchJune 31,30, 20252026 was $15,340,158 compared to $2,793,612$12,266,475 for the three months
ended MarchJune 31,30, 2025, aan decreaseincrease of $1,029,556
$3,073,683 or 36.9%. The decrease was25.1%, driven primarily by a decrease in our USAFRTX T-38MPBD PacerMissile ClassicWing Structuralprogram,
our ModificationNGJ Kits– Mid Band Pods and Advanced Tactical Pods program dueand toNGJ timing
of– materialLow receipts.Band Pods program.
Revenue
from commercialmilitary subcontracts was
$916,907 for the threesix months ended MarchJune 31,30, 2026 was $30,019,135 compared to $1,280,388$23,593,083 for the threesix months ended
June March 31,30, 2025, aan decreaseincrease of $363,481
$6,426,052 or 28.4%. The decrease was27.2%, driven primarily by a decrease in our EmbraerNGJ Phenom-300– EngineMid
Band InletPods Assembliesand program,Advanced Tactical Pods program and NGJ – Low Band Pods program partially offset
by the commencement of production onto our EmbraerF-16 Phenom-100 Engine Inlet Assemblies and CollinsRI/DCC’s
Compac Enclosures programs.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
Total
Cost of Sales for the three months ended MarchJune 31,30, 2026 and 2025 was $12,880,049$13,709,795 and $13,751,133,$14,515,726, respectively, a decrease of $805,931
$871,084 or 6.3%.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%.
Procurement
for the three months ended March 31, 2026 was $7,509,709 compared to $8,294,588 for the three months ended March 31, 2025, a decrease
of $784,879 or 9.5%, 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 March 31, 2026 were $1,316,157 compared to $1,642,586 for the three months ended March 31, 2025,
a decrease of $326,429 or 19.9% primarily driven by decreased work performed on the A-10
Main Landing Gear Pods program due to termination.
FactoryProcurement
overheadfor the three months ended June 30, 2026 was $8,787,126 compared to $8,860,302 for the three months ended MarchJune 31,30, 2026 was $3,937,186 compared to $4,118,581 for the three months ended March 31,
2025, a decrease
of $181,395$73,176 or 4.4%.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
MarchJune 31,30, 2026 was $116,997$(147,572) compared to a $(304,622)$198,599 for the three months ended MarchJune 31,30, 2025, ana increasedecrease of $421,619$346,171 or 138.4%.174.3%.
The increasedecrease is primarily the result lessof benefitsincreased realized on programs nearing completion and higher lossinventory reserve requirements
during in the threeprior monthsyear endeddue Marchto 31,aged 2026 asmaterial compared
to the threecurrent months ended March 31, 2025.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 and gross profit percentage (“gross margin”) for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 was
$4,479,891$3,871,737 and 25.8%22.0% compared to $1,649,475$663,382 and 10.7%,4.4% respectively, an increase of $2,830,416,$3,208,355, or 171.6%,483.6%, forand the1,760 reasonsbasis noted
above associated with the A-10 program.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.
During
the three and six months ended MarchJune 31,30, 20252026 and 2024,2025, circumstances required that we make changes in estimates to various contracts.
Such changes in estimates resulted in changes in total gross profit as follows:
The
net adjustment of $0.7 million and $1.4 million for the three and six months ended MarchJune 31,30, 2026 respectively, is driven primarily
by an unfavorable adjustmentadjustments on our
Embraer Phenom-300 Engine Inlet Assemblies program.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 for the three months ended MarchJune 31,30, 2026 were $2,650,263$2,675,952 compared to $2,835,777$2,654,024 for the three
months ended MarchJune 31,30, 2025, aan decreaseincrease of $185,514$21,928 or 6.5%.0.8%. The decreaseincrease was primarily the dueresult of higher professional fees
toand accrued compensation, partially offset by lower salary related costs.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 for the three months ended MarchJune 31,30, 2026 was $291,935,$312,939, compared to $488,091$287,546 for the three months ended MarchJune 31,30, 2025,
aan decreaseincrease of $196,156$25,393 or 40.2%. The decrease was the result of lower year-over-year interest rates charged on our outstanding
debt under the Loan and Security Agreement.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 for the three months ended MarchJune 31,30, 2026 was $1,568,066$882,846 compared to $(1,672,8932,272,708) for the
the three months ended MarchJune 31,30, 2025,2025 an increase of $3,240,959 or 193.7% for the reasons noted above.$3,155,554.
Provision/(Benefit)
for Income Taxes
ProvisionIncome
(loss) before provision for income taxes for the threesix months ended MarchJune 31,30, 2026 was $331,348$2,450,912 compared to $(benefit3,945,601) for income taxes of $(348,969) forthe
the threesix months ended MarchJune 31,30, 2025,2025 an increase of $680,317 or 195.0%.$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.
The effective income tax rate for the three months
ended March 31, 2026 and 2025 approximated the statutory rate of approximately 21%.
Net
income (loss) for the three months ended MarchJune 31,30, 2026 was $1,236,718$685,615 or $0.10$0.05 per basic share, compared to net (loss) of $(1,323,9241,324,959)
or $(0.10) per basic share, for the same period last year. Diluted income per share was $0.09$0.05 for the three months ended MarchJune
31,30, 2026 calculated utilizing 13,040,99813,042,595 weighted average shares
outstanding. Diluted (loss) per share was $(0.10) for the three
months ended MarchJune 31,30, 2025 calculated utilizing 12,720,14812,748,869 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.
At
MarchJune 31,30, 2026, we had working capital of $22,725,875$23,488,549 compared to $20,388,755 at December 31, 2025, an increase of $2,337,120$3,099,794 or
or 11.5%.15.2%. The increase was driven primarily by an increase in cashaccounts and contract assets partly offset by a decrease in accounts
receivable.
A
large portion of our cash flow is used to pay for materials and processing costs associated with contracts that are in process
and and
which do not provide for progress payments. Costs and related earnings for which we aredo not able to bill on a progress basisbasis, and which,
as a result, we bill upon shipment of products, are made upcomponents of contract
assets on our consolidated balance sheetsheets and represent
the aggregate costs and related earnings for uncompleted contracts for
which the customer has not yet been billed. These costs
and earnings are recovered upon shipment of products and presentation
of billings in accordance with contract terms.
Because
ASC 606 requires us to use estimates in determining revenues,revenue, costs and profits and in assigning thosethe amounts to accounting periods,
there can be a significant disparity between earnings (both for accounting and tax purposes) as reported and the actual cash that
we receive during any reporting period.
Accordingly, it is possible that we experiencemay shortfallshave a shortfall in our cash flow and may need
to borrow money or take steps to delay
certaindefer cash outflows until the reported earnings materialize into actual cash receipts.
SeveralSome
of our programs require us to expend up-front costs that may have to be amortized over a portion of production units. In the case
of significant program delays and/or program cancellations, we could experience margin degradation, which may be material for
costs that are not recoverable. Such charges and the loss of up-front costs could have a material impact on our liquidity and
results of operations.
We
continue tocontinuously work to obtainimprove betterour payment terms withfrom our customers, including accelerated progress payment arrangements, as well
as exploring alternativealternate funding sources.
At
MarchJune 31,30, 2026, we had cash of $1,002,548$835,875 compared to $899,199 at December 31, 2025, ana increasedecrease of $103,349$63,324 or 11.5%.7.0%. This increasedecrease
was primarily the result of positive cash flowsflow from the reductionused in accountsoperating receivableactivities duringand thenet quarter.impacts of financing activities.
The
SOFR Rate was 3.7% as of MarchJune 31,30, 2026 and as such, the Company’s interest rate on the Revolving Loan and Term Loan was
6.2% as of MarchJune 31,30, 2026.
Our Credit Facilities consisted of the following as of:
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. MaturitiesAs of June 30, 2026, the aggregate future principal payments on long term debt
are as follows:
As
of MarchJune 31,30, 2026 and December 31, 2025, the Company had $19,173,672$19,111,172 and $18,373,672 outstanding under the Loan and Security Agreement,
respectively.
CVU insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-25 | Hakim Dorith |
Grant/award | 2,876 | — | — |
| 2026-06-08 | Mannix Robert |
Grant/award | 32,828 | — | — |
| 2026-06-08 | Hakim Dorith |
Grant/award | 75,126 | — | — |
| 2026-06-08 | Hakim Dorith |
Shares withheld for tax | 13,013 | $3.48 | $45.3K |
| 2026-06-08 | Hakim Dorith |
Disposition to issuer | 40,199 | — | — |
| 2025-12-01 | Levesque Pamela |
Shares withheld for tax | 8,125 | $2.58 | $21.0K |
Well-known investors holding CVU (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 53,250 | $276.4K | 0.0% | Reduced 2% |