U.S.SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM10-KSB

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|   | Annual Reportunder Section 13 or 15(d) of the Securities Exchange Act of 1934 |

For the fiscal year ended            December 31, 2004

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|   | Transition Report underSection 13 or 15(d) of the Securities Exchange Act of 1934 |

For the transition period from                                 to                                

Commission file number    1-11398

Commission filenumber     1-11398

      CPI AEROSTRUCTURES,INC.      

(Name ofsmall business issuer in its charter)

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|             NewYork             |  |     11-2520310     |
| (State or other jurisdiction                                                                                                                            |  | (I.R.S.Employer                                            |
| of incorporation ororganization)                                                                                                                        |  | IdentificationNo.)                                         |
|                                                                                                                                                    |  |
| 60 Heartland Blvd.,Edgewood, New York                                                                                                                   |  |     11717          |
| (Address of principal executive offices)                                                                                                                |  | (ZipCode)                                                  |
|                                                                                                                                                         |

                                        (631)586-5200                                        

(Issuer's Telephone Number, IncludingArea Code)

Securities registered under Section12(b) of the Exchange Act:

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|-----------------------------------------|--|-----------------------------------------|--|--|--|--|
| Titleof EachClass                       |  | Nameof Each Exchange on WhichRegistered |
| Common Shares, $.001 par valueper share |  | American StockExchange                  |
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Securitiesregistered under Section 12(g) of the Exchange Act: None

Check whether the issuer: (1) filed all reports required tobe filed by Section 13 or 15(d) of the Exchange Act during the past 12months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filingrequirements for past 90 days. Yes   X   No

Check if there is no disclosure of delinquent filers in response toItem 405 of Regulation S-B contained in this form, and no disclosurewill be contained, to the best of registrant's knowledge, indefinitive proxy or information statements incorporated by reference inPart III of this Form 10-KSB or any amendment to this Form 10-KSB.

The issuer's revenues for its most recent fiscalyear were $30,269,030.

The aggregate market value of our commonshares held by non-affiliates on March 24, 2005 was approximately$47,401,024.

As of March 24, 2005, the issuer had 5,418,400common shares, $.001 par value, outstanding.

Transitional SmallBusiness Disclosure Format: Yes        No  X  

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CPIAEROSTRUCTURES, INC. FORM 10-KSB ANNUAL REPORT-2004 TABLE OFCONTENTS

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|------------------------------|--|--------------------------------------------------------------------------------------------------------------|--|---------------|--|--|--|--|--|--|
| PARTI                        |  |   3                                                                                                |
| Item1.                       |  | DESCRIPTIONOF BUSINESS                                                                                       |  |   3 |
| Item2.                       |  | DESCRIPTION OF PROPERTY                                                                                      |  | 10            |
| Item 3.                      |  | LEGAL PROCEEDINGS                                                                                            |  | 10            |
| Item 4.                      |  | SUBMISSION OF MATTERS TO A VOTE OFSECURITYHOLDERS                                                            |  | 10            |
| PARTII                       |  | 11                                                                                                           |
| Item5.                       |  | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDSMALL BUSINESS ISSUER PURCHASES OF EQUITYSECURITIES |  | 11            |
| Item6.                       |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS                         |  | 11            |
| Item 7.                      |  | FINANCIALSTATEMENTS                                                                                          |  | 14            |
| Item8.                       |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE                          |  | 14            |
| Item8A.                      |  | CONTROLS AND PROCEDURES                                                                                      |  | 14            |
| Item 8 B.                    |  | OTHERINFORMATION                                                                                             |  | 15            |
| PARTIII                      |  | 16                                                                                                           |
| Item9.                       |  | DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT                                                            |  | 16            |
| Item10.                      |  | EXECUTIVE COMPENSATION                                                                                       |  | 19            |
| Item 11.                     |  | SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS                 |  | 23            |
| Item 12.                     |  | CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS                                                                |  | 25            |
| Item 13.                     |  | EXHIBITS, LIST AND REPORTS ON FORM8-K                                                                        |  | 25            |
| Item 14.                     |  | PRINCIPALACCOUNTANT FEES AND SERVICES                                                                        |  | 28            |
| INDEX TO FINANCIALSTATEMENTS |  | F-1                                                                                                          |
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PARTI

Item 1.    DESCRIPTION OF BUSINESS

Introduction

CPI Aerostructures, Inc. ("CPIAero" or the "Company") isengaged in the contract production of structural aircraft partsprincipally for the United States Air Force and other branches of theU.S. armed forces. We also provide aircraft parts to the commercialsector of the aircraft industry but we believe that significantlyweaker business prospects exist in this sector. Our strategy for growthincludes de-emphasizing our commercial operations and concentrating ongovernment and military sales. 99% of our revenues for 2004 and98% of our revenues for 2003 were derived from governmentcontract sales.

We operate as a prime contractor supplyingstructural aircraft parts under prime contracts with the U.S.Government. In that capacity, we deliver skin panels, leading edges,flight control surfaces, engine components, wing tips, cowl doors,nacelle assemblies and inlet assemblies for military aircraft such asthe C-5A "Galaxy" cargo jet, the T-38"Talon" jet trainer, the C-130"Hercules" cargo jet, the A-10"Thunderbolt" or"Warthog" attack jet and the E-3"Sentry" AWACS jet. We also supply commercialaircraft products including aprons and engine mounts, which attach jetengine housings to aircraft such as the Lear 60 and Astra Galaxybusiness jets. Our products are sub-assemblies, a series of parts fixedtogether to form a larger unit that will comprise a part of a complexaerodynamic structure. In conjunction with our assembly operations, weprovide engineering, technical and program management services to ourcustomers.

Due to budget constraints in the mid to late 1990s,the Clinton Administration closed several military installations and asa result began outsourcing many functions, including the assembly ofaircraft structural component parts into subassemblies. Until then, themilitary had performed this function internally. The ability to managethe bidding process, subcontract production of components and assemblecomponents into subassemblies is our core competency and thegovernment's decision to outsource this function has resulted inincreased business opportunities for us.

CPI has 24 years ofexperience as a contractor, completing over 1,900 contracts to date.Most members of our management team have held management positions atlarge defense contractors, including Northrop Grumman Corporation,Lockheed Martin Corporation and The Fairchild Corporation. Ourtechnical team possesses extensive technical expertise and programmanagement, and integration capabilities. Our competitive advantagelies in our ability to offer large contractor capabilities with theflexibility and responsiveness of a small company, while stayingcompetitive in cost and delivering superior quality products. While thelarger prime contractors compete for significant modification awardsand subcontract components to other suppliers, they generally do notcompete for awards for smaller modifications or spare and repair parts,even for planes for which they are the original manufacturer. We alsoqualify as a small business because we have less than 1,000 employees,and this allows us to compete on military awards set aside forcompanies with this small business status.

While historicallythe majority of our contracts have been valued below $200,000, werecently competed for, and were awarded, significantly largercontracts, including an estimated $61 million award for the T-38"Talon" jet trainer and an estimated $215million award for the C-5 cargo plane. We intend to continue to bid onthese larger contracts. We believe that our improved financialcondition as a result of our February 2003 public offering and oursuccess with the T-38 program will allow us to compete more effectivelyfor larger awards in the future.

CPI was incorporated under thelaws of the State of New York in January 1980 under the name CompositeProducts International, Inc. CPI changed its name to Consortium ofPrecision Industries, Inc. in April 1989 and to CPI Aerostructures,Inc. in July 1992. In January 2005, we began doing business under thename CPI Aero.

Our principal office is located at 60 HeartlandBlvd., Edgewood, New York 11717 and our telephone number is (631)586-5200.

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Discontinued Operations

In 1997,in an effort to diversify our business, we acquired Kolar Machine,Inc., a manufacturer of precision machine parts for the electronicsindustry. As a result of the downturn in the electronic manufacturingsector, we terminated Kolar's operations in December 2001, closedits Ithaca, New York facility and liquidated most of its assets throughan auction in February 2002. Due to our decision to close the Kolarfacilities and liquidate its assets, Kolar's operations have beenclassified as "discontinued."

Significant Contracts

The ongoing maintenance of existingaircraft by the U.S. Air Force is the primary driver of our growth inboth the number of contracts and the size of awards. Our contracts withthe Air Force accounted for substantially all of our revenue for 2003and 2004. In most cases, we supply structural aircraft parts foraircraft that are no longer being manufactured but continue to be usedand need to be maintained. CPI has been awarded contracts within thesemaintenance programs on the C-5A, T-38 and E-3 aircraft. The followingare current Department of Defense (DOD) budget estimates for 2005program spending on theseaircraft:

|          |  |                      |  |  |  |  |
|----------|--|----------------------|--|--|--|--|
| Aircraft |  | 2005ProgramSpending* |
| C-5A     |  | $431million          |
| T-38     |  | $153million          |
| E-3      |  | $100million          |
|          |

|   |                              |
|---|------------------------------|
| * | Source: Departmentof Defense |

The C-5A "Galaxy"cargo jet is one of the largest aircraft in the world and can carry amaximum cargo load of 270,000 pounds. Lockheed delivered the first C-5Ain 1970. The C-5A Galaxy carries fully equipped combat-ready militaryunits to any point in the world on short notice and then provides fieldsupport to sustain the fighting force. The Air Force has created acomprehensive program to ensure the capabilities of its C-5A fleetuntil 2040. In 2004, the Air Force awarded us a seven-year TOP contractto build an assortment of parts for the C-5A, including wing tips andpanels. The TOP contract is the largest contract in our history, with apotential value of up to $215 million. We are one of the leadingsuppliers of structural spare parts and assemblies for the C-5Aaircraft. We assemble numerous C-5A parts, including panels, slats,spoilers and wing-tips and are the only supplier of C-5A wing-tips tothe U.S. government. Like the C-5A itself, the wing-tip is a largestructure and is expensive – costing up to $750,000 for eachreplacement piece. Our first C-5A contract was approximately $590,000of structural spares and was awarded in 1995. Since then, we havereceived awards aggregating approximately $71 million. C-5A contractsaccounted for approximately 50% of our revenues for 2004.

The T-38 "Talon" is a twin-engine,high-altitude, supersonic jet primarily used for pilot training thatfirst flew in 1959. More than 1,100 were delivered to the Air Forcebetween 1961 and 1972, when production ended. There are approximately500 T-38's in active service with the Air Force, which has aprogram designed to extend the structural life of the T-38 until 2020.In 2001, we were awarded a ten-year contract to build the structuralinlets for the T-38 Propulsion Modification Program. At the time, theT-38 contract was the largest in our history, worth an estimated $61million over the life of the program. The length and size of thisprogram allow us to develop a long-term backlog and establish ourselvesas a successful prime contractor for larger and longer term programs.The T-38 contract accounted for 31% of our revenues for2004.

The E-3 "Sentry" is an airbornewarning and control systems (AWACS) aircraft that provides all-weathersurveillance, command, control and communications to the U.S., NATO andother allied air defense forces. The E-3 is used primarily by theUnited States and NATO to detect, identify and track airborne enemyforces. It is the premier air battle command and control aircraft inthe world today. Boeing delivered the first E-3 in 1977 and there areapproximately 30 E-3 aircraft in active service with the U.S. AirForce. We currently have contract awards on the E-3 aggregatingapproximately $5.4 million. We make nose cowlings, skin panels and pan,rod, brace and seal assemblies for the E-3. E-3 contracts accounted for1% of our revenues for 2004.

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Sales and Marketing

We obtain allof our military contracts for our products and services through theprocess of competitive bidding. While historically the majority of ourcontracts have been valued below $200,000, we successfully havecompeted for and have been awarded significantly larger contracts. Ouraverage sales cycle, which generally commences at the time aprospective customer issues a request for proposal and ends uponexecution of a contract with the customer, typically ranges from sixmonths to one year. Our military customers have included Defense SupplyCenter Richmond, Wright-Patterson Air Force Base (AFB), Warner RobinsAFB, Tinker AFB, NAVICP, Hill AFB, U.S. Army and Redstone. Ourcommercial customers have included Boeing, B.F. Goodrich (Rohr),Northrop Grumman, Lockheed Martin, Nordam, Shinmaywa and Derco.

We use third party service providers to help locate small governmentcontracts that are regularly posted by the various defense logisticagencies. The service providers screen contracts according to criteriawe establish and forward matching contracts to us. We then view therelevant contracts directly on government websites and select contractson which we will bid based on how well they fit our core competency. Wegenerally bid on 40 to 50 contracts per week. Over the past threeyears, we have been awarded approximately 13% of the contractson which we have bid.

We qualify for small business statusbecause we have fewer than 1,000 employees. The military's fiscalyear 2004 program goals were 23% for small business primecontracting and 42% for subcontracting. During 2004,approximately 35% of the value of our current contracts wereawarded to us under this program.

The U.S. Air Force operatesthree Air Logistics Centers (ALC) through which it purchases allstructural replacement and modification parts. Each ALC is located on adomestic Air Force base and is responsible for the repair andmodification of different aircraft. Parts worn out in the normal courseof operation and discarded instead of repaired are ordered through thecentralized Defense Supply Center Richmond (DSCR). We use on-siteconsultants at each ALC and the DSCR to help in the procurementprocess. These consultants are important as relationship managers andtypically have previous experience on the procurement side. Theconsultants provide us with timely feedback and keep us apprised oflarge contracts that might be up for bidding. Additionally, wecurrently have agreements with six sales representatives to market ourproducts to a broader base of customers.

The Market

During most of the 1990s, defense spending was basically flat orexperienced a slight decline. In contrast, the defense budget in thecurrent decade has been increasing. The Department of Defense budgetincreased from $319 billion in 2001 to $400 billion in 2005, anincrease of 25%. President Bush is requesting approximately $419billion for the 2006 defense budget. The Department of Defenseestimates that this figure could rise to $502 billion in 2011.

The majority of our parts are sold for use by the United States AirForce (USAF). The amount spent by the USAF for aircraft procurement wasapproximately $10.5 billion in 2002, $12.9 billion in 2003, $12.0billion in 2004 and is budgeted for $13.2 billion in 2005. Procurementincludes the acquisition of new aircraft, aircraft modificationprograms and spending on spare and repair parts.

Extensivemodification programs are being implemented to increase the servicelife of aircraft, as some are no longer being manufactured. As agingaircraft are being maintained, support for aging aircraft, includingspare parts and assemblies, also is required. Over the past severalyears, modification of in-service aircraft has accounted for between15% and 16.5% of the annual USAF procurement budget.

Backlog

We produce custom assemblies pursuant to long-termcontracts and customer purchase orders. Backlog consists of aggregatevalues under such contracts and purchase orders, excluding the portionpreviously included in operating revenues on the basis of percentage ofcompletion accounting, and 

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including estimates of future contract priceescalation. Substantially all of our backlog is subject to terminationat will and rescheduling, without significant penalty. Congress oftenappropriates funds for a particular program or contract on a yearly orquarterly basis, even though the contract may call for performance thatis expected to take a number of years. Therefore, our funded backlogdoes not include the full value of our contracts. Our backlog as ofDecember 31, 2003 and December 31, 2004, was asfollows:

|          |  |                  |            |                  |  |        |            |        |  |  |
|----------|--|------------------|------------|------------------|--|--------|------------|--------|--|--|
| Backlog  |  | December31, 2003 |            | December 31,2004 |
| Funded   |  | $                | 34,570,147 |             |  | $      | 23,871,036 |   |
| Unfunded |  |             | 42,071,684 |             |  |   | 34,931,824 |   |
| Total    |  | $                | 76,641,831 |             |  | $      | 58,802,860 |   |
|          |

Ofthe total amount of our backlog at December 31, 2004, approximately98.6% was attributable to government contracts. Approximately$15.5 million (65%) of the funded backlog at December 31, 2004is scheduled for delivery during 2005.

Although our new contractawards reached $34.9 million in 2004, this was primarily due to ourreceipt of the 2005 T-38 order in the fourth quarter of 2004, as wellas a $3 million subcontract award from a major prime defense contractorduring the year. While the government has continued to request quotes,and our bidding activity and win rate remains at their approximatehistorical levels, we are currently experiencing a significant slowdowngovernment procurement. Our reduced backlog is reflective of thisgeneral slowdown in overall government ordering.

Material andParts

We subcontract production of substantially all componentparts incorporated into our products to third party manufacturers underfirm fixed price orders. Our decision to purchase certain componentsgenerally is based upon whether the components are available to meetrequired specifications at a cost and delivery consistent with customerrequirements. From time to time, we are required to purchase custommade parts from sole suppliers and manufacturers in order to meetspecific customer requirements. To date, we have not experiencedmaterial delays in connection with obtaining custom parts and webelieve that the loss of any single supplier or manufacturer would nothave a material adverse effect on our business.

We obtain ourraw materials from several commercial sources. Although certain itemsare only available from limited sources of supply, we believe that theloss of any single supplier would not have a material adverse effect onour business.

Competition

The markets for our productsare highly competitive. We compete with numerous larger,well-established prime contractors engaged in the supply of aircraftparts and assemblies to the military, including Northrop GrummanCorporation, Lockheed Martin Corporation, The Boeing Company, TheNordam Group and Vought Aircraft Industries, Inc. All of thesecompetitors possess significantly larger infrastructures, greaterresources and the capabilities to respond to much larger contracts. Wealso compete against smaller contractors such as Aerocomponents,Aerospace Engineering and Support, GSE Dynamics, Honeycomb Company ofAmerica, Alton Iron Works, B&B Devices and PrecisionManufacturing.

We believe that our competitive advantage lies inour ability to offer large contractor capabilities with the flexibilityand responsiveness of a small company, while staying competitive incost and delivering superior quality products. While the larger primecontractors compete for significant modification awards and subcontractcomponents to other suppliers, they generally do not compete for awardsin smaller modifications, spares and replacement parts, even for planesfor which they are the original manufacturer. We believe we competeeffectively against the smaller competitors because our smallercompetitors generally do not have the expertise we have in respondingto requests for proposals for government contracts.

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Government Regulation

Environmental Regulation

We are subject to regulationsadministered by the United States Environmental Protection Agency, theOccupational Safety and Health Administration, various state agenciesand county and local authorities acting in cooperation with federal andstate authorities. Among other things, these regulatory bodies imposerestrictions to control air, soil and water pollution, to protectagainst occupational exposure to chemicals, including health and safetyrisks, and to require notification or reporting of the storage, use andrelease of certain hazardous chemicals and substances. The extensiveregulatory framework imposes compliance burdens and risks on us.Governmental authorities have the power to enforce compliance withthese regulations and to obtain injunctions or impose civil andcriminal fines in the case of violations.

The ComprehensiveEnvironmental Response, Compensation and Liability Act of 1980 (CERCLA)imposes strict, joint and several liability on the present and formerowners and operators of facilities that release hazardous substancesinto the environment. The Resource Conservation and Recovery Act of1976 (RCRA) regulates the generation, transportation, treatment,storage and disposal of hazardous waste. In New York, the handling,storage and disposal of hazardous substances are governed by theEnvironmental Conservation Law, which contains the New Yorkcounterparts of CERCLA and RCRA. In addition, the Occupational Safetyand Health Act, which requires employers to provide a place ofemployment that is free from recognized and preventable hazards thatare likely to cause serious physical harm to employees, obligatesemployers to provide notice to employees regarding the presence ofhazardous chemicals and to train employees in the use of suchsubstances.

Our operations require the use of a limited amountof chemicals and other materials for painting and cleaning, includingsolvents and thinners, which are classified under applicable laws ashazardous chemicals and substances. We have obtained a permit from theTown of Islip, New York, Building Division in order to maintain a paintbooth containing flammable liquids.

Federal AviationAdministration Regulation

We are subject to regulation by theFederal Aviation Administration (FAA) under the provisions of theFederal Aviation Act of 1958, as amended. The FAA prescribes standardsand licensing requirements for aircraft and aircraft components. We aresubject to inspections by the FAA and may be subjected to fines andother penalties (including orders to cease production) fornoncompliance with FAA regulations. Our failure to comply withapplicable regulations could result in the termination of or ourdisqualification from some of our contracts, which could have amaterial adverse effect on our operations.

Government ContractCompliance

Our government contracts are subject to theprocurement rules and regulations of the United States government. Manyof the contract terms are dictated by these rules and regulations.During and after the fulfillment of a government contract, we may beaudited in respect of the direct and allocated indirect costsattributed thereto. These audits may result in adjustments to ourcontract costs. Additionally, we may be subject to U.S. governmentinquiries and investigations because of our participation in governmentprocurement. Any inquiry or investigation can result in fines orlimitations on our ability to continue to bid for government contractsand fulfill existing contracts.

We believe that we are insubstantial compliance with all federal, state and local laws andregulations governing our operations and have obtained all materiallicenses and permits required for the operation of our business.

Insurance

We maintain a $2 million general liabilityinsurance policy, a $10 million products liability insurance policy,and a $5 million umbrella liability insurance policy. We believe thiscoverage is 

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adequate for the types of products presentlymarketed because of the strict inspection standards imposed on us byour customers before they take possession of our products.Additionally, the Federal Acquisition Regulations generally providethat we will not be held liable for any loss of or damage to propertyof the government that occurs after the government accepts delivery ofour products and that results from any defects or deficiencies in ourproducts unless the liability results from willful misconduct or lackof good faith on the part of our managerial personnel.

Proprietary Information

None of our current assemblyprocesses or products is protected by patents. We rely on proprietaryknow-how and confidential information and employ various methods toprotect the processes, concepts, ideas and documentation associatedwith our products. These methods, however, may not afford completeprotection and there can be no assurance that others will notindependently develop such processes, concepts, ideas anddocumentation.

Employees

As of March 24, 2005, CPI had67 full-time employees. We employ temporary personnel with specializeddisciplines on an as-needed basis. None of our employees is a member ofa union. We believe that our relations with our employees are good.

Risk Factors

You should consider the following riskscarefully in evaluating us and our business before making an investmentdecision. The risks described below are not the only risks we face.Additional risks may also impair our business operations. If any of thefollowing risks occur, our business, results of operations or financialcondition could be materially adversely affected. If that happens, thetrading price of our common shares could decline, and you may lose allor part of your investment.

Risks related to ourbusiness

We depend on government contracts for most of ourrevenues.

We are a supplier, either directly or as asubcontractor, to the U.S. government and its agencies, principally theU.S. Air Force. 99% of revenues for 2004 and 98% ofrevenues for 2003 were derived from government contract sales. One ofour contracts, for the T-38 "Talon",accounted for 31% of our revenue for 2004. We depend on thesegovernment contracts for most of our business. If we are suspended ordebarred from contracting with the U.S. government, if our reputationor relationship with individual federal agencies were impaired, or ifthe government otherwise ceased doing business with us or significantlydecreased the amount of business it does with us, our business,prospects, financial condition and operating results would bematerially adversely affected.

We face risks relating togovernment contracts.

There are inherent risks in contractingwith the U.S. government, including risks that are peculiar to thedefense industry, which could have a material adverse effect on ourbusiness, prospects, financial condition and operating results. Allcontracts with the U.S. government contain provisions and are subjectto laws and regulations that give the government rights and remediesnot typically found in commercial contracts, including rights thatallow the government to:

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| •  | terminatecontracts for convenience in whole or in part at anytime; |

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|--------------|-----------------------------------------------------------------------------------------------|
| •  | reduce or modify contracts orsubcontracts if its requirements or budgetary constraintschange; |

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|--------------|----------------------------------------------------------------------------------------------------------------------------|
| •  | cancel multi-year contracts andrelated orders if funds for contract performance for any subsequentyear become unavailable; |

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|              |                                                                                |
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| •  | adjust contractcosts and fees on the basis of audits completed by itsagencies; |

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|--------------|-----------------------------------------------------|
| •  | claim rights in products andsystems produced by us; |

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|--------------|-----------------------------------------------------------------|
| •  | suspend or debarus from doing business with U.S. government;and |

|              |                                                |
|--------------|------------------------------------------------|
| •  | control or prohibit the export ofour products. |

If the U.S. government terminates a contract forconvenience, we may recover only our incurred or committed costs,settlement expenses and profit on work completed prior to thetermination. If the government terminates a contract for default, wemay not recover even those amounts, and instead may be liable forexcess costs incurred by the government in procuring undelivered itemsand services from another source.

We have risks associated withcompeting in the bidding process for U.S. government contracts.

We obtain many of our U.S. government contracts through acompetitive bidding process. In the bid process, we face the followingrisks:

|              |                                                                                                                                  |
|--------------|----------------------------------------------------------------------------------------------------------------------------------|
| •  | We must bid on programs inadvance of their completion, which may result in unforeseentechnological difficulties or costoverruns; |

|              |                                                                                                                                              |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We must devote substantialtime and effort to prepare bids and proposals for competitively awardedcontracts that may not be awarded to us;and |

|              |                                                                                |
|--------------|--------------------------------------------------------------------------------|
| •  | Awarded contracts may not generatesales sufficient to result in profitability. |

We are subject tostrict governmental regulations relating to the environment, whichcould result in fines and remediation expense in the event ofnon-compliance.

We are required to comply with extensive andfrequently changing environmental regulations at the federal, state andlocal levels. Among other things, these regulatory bodies imposerestrictions to control air, soil and water pollution, to protectagainst occupational exposure to chemicals, including health and safetyrisks, and to require notification or reporting of the storage, use andrelease of certain hazardous substances into the environment. Thisextensive regulatory framework imposes significant compliance burdensand risks on us. In addition, these regulations may impose liabilityfor the cost of removal or remediation of certain hazardous substancesreleased on or in our facilities without regard to whether we knew of,or caused, the release of such substances. Furthermore, we are requiredto provide a place of employment that is free from recognized andpreventable hazards that are likely to cause serious physical harm toemployees, provide notice to employees regarding the presence ofhazardous chemicals and to train employees in the use of suchsubstances. Our operations require the use of a limited amount ofchemicals and other materials for painting and cleaning that areclassified under applicable laws as hazardous chemicals and substances.If we are found not to be in compliance with any of these rules,regulations or permits, we may be subject to fines, remediationexpenses and the obligation to change our business practice, any ofwhich could result in substantial costs that would adversely impact ourbusiness operations and financial condition.

We may be subjectto fines and disqualification for non-compliance with Federal AviationAdministration regulations.

We are subject toregulation by the Federal Aviation Administration under the provisionsof the Federal Aviation Act of 1958, as amended. The FAA prescribesstandards and licensing requirements for aircraft and aircraftcomponents. We are subject to inspections by the FAA and may besubjected to fines and other penalties (including orders to ceaseproduction) for noncompliance with FAA regulations. Our failure tocomply with applicable regulations could result in the termination ofor our disqualification from some of our contracts, which could have amaterial adverse effect on our operations.

We utilize thepercentage of completion method of accounting which involvesconsiderable use of estimates in determining revenues, costs andprofits and in assigning amounts to accounting periods.

Werecognize revenue from our contracts over the contractual period underthe percentage-of-completion (POC) method of accounting. Under the POCmethod of accounting, sales 

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and gross profit are recognized as work isperformed based on the relationship between actual costs incurred andtotal estimated costs at the completion of the contract. Recognizedrevenues that will not be billed under the terms of the contract untila later date are recorded as an asset captioned "Costs andestimated earnings in excess of billings on uncompletedcontracts." Contracts where billings to date have exceededrecognized revenues are recorded as a liability captioned"Billings in excess of costs and estimated earnings onuncompleted contracts." Changes to the original estimatesmay be required during the life of the contract. Estimates are reviewedmonthly and the effect of any change in the estimated gross marginpercentage for a contract is reflected in cost of sales in the periodthe change becomes known. The use of the POC method of accountinginvolves considerable use of estimates in determining revenues, costsand profits and an assigning the amounts to accounting periods. As aresult, there can be a significant disparity between earnings (both foraccounting and taxes) as reported and actual cash received by us duringany reporting period. We continually evaluate all of the issues relatedto the assumptions, risks and uncertainties inherent with theapplication of the POC method of accounting; however we cannot assureyou that our estimates will be accurate. If our estimates are notaccurate or a contract is terminated, we will be forced to adjustrevenue in later periods. Furthermore, even if our estimates areaccurate, we may have a shortfall in our cash flow and we may need toborrow money to pay taxes until the reported earnings materialize toactual cash receipts.

If the contracts associated with ourbacklog were terminated, our financial condition would beadversely affected.

The maximum contract value specified undereach government contract that we enter into is not necessarilyindicative of the revenues that we will realize under that contract.Because we may not receive the full amount we expect under a contract,we may not accurately estimate our backlog because the actual accrualof revenues on programs included in backlog may never occur or maychange. Cancellations of pending contracts or terminations orreductions of contracts in progress could have a material adverseeffect on our business, prospects, financial condition or results ofoperations. As of December 31, 2004, our backlog was $58.8 million, ofwhich 40% was funded and 60% was unfunded.

We maybe unable to retain personnel who are key to our operations.

Our success, among other things, is dependent on our ability toattract and retain highly qualified senior officers and engineers.Competition for key personnel is intense. Our ability to attract andretain senior officers and experienced, top rate engineers is dependenton a number of factors, including prevailing market conditions andcompensation packages offered by companies competing for the sametalent. The inability to hire and retain these persons may adverselyaffect our production operations and other aspects of our business.

Item 2.    DESCRIPTION OF PROPERTY

CPIAerostructures' executive offices and production facilities aresituated in an approximate 60,000 square foot building located at 60Heartland Blvd., Edgewood, New York 11717. CPI Aerostructures occupiesthis facility under a ten-year lease that commenced in January 2005.The current monthly base rent is $31,750, plus real estate taxes. Ourbase rent increases at 3% per year through 2014. We believe thatour facilities are adequate for our current needs.

Item3.    LEGAL PROCEEDINGS

None

Item 4.    SUBMISSIONOF MATTERS TO A VOTE OF SECURITYHOLDERS

None

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PARTII

|               |                                                                                                              |
|---------------|--------------------------------------------------------------------------------------------------------------|
| Item 5.  | MARKET FOR COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OFEQUITY SECURITIES |

Market Information

Our common sharesare listed on the American Stock Exchange under the symbol CVU. Thefollowing table sets forth for 2003 and 2004, the high and low salesprices of our common shares for the periods indicated, as reported bythe American StockExchange.

|                                |  |                   |        |        |  |        |        |        |  |  |
|--------------------------------|--|-------------------|--------|--------|--|--------|--------|--------|--|--|
| Period                         |  | High              |        | Low    |
| 2003                           |  |              |   |   |  |   |   |   |
| QuarterEnded March 31,2003     |  | $  6.53 |        | $3.95  |
| QuarterEnded June 30,2003      |  | $  9.10 |        | $6.01  |
| QuarterEnded September 30,2003 |  | $10.81            |        | $8.20  |
| Quarter EndedDecember 31,2003  |  | $12.50            |        | $8.95  |
| 2004                           |  |              |        |   |
| QuarterEnded March 31,2004     |  | $11.86            |        | $9.45  |
| Quarter Ended June30, 2004     |  | $11.70            |        | $9.55  |
| Quarter EndedSeptember 30,2004 |  | $12.02            |        | $8.91  |
| Quarter EndedDecember 31, 2004 |  | $11.57            |        | $8.65  |
|                                |

OnMarch 24, 2005, the closing sale price for our common shares on theAmerican Stock Exchange was $11.15. On March 24, 2005, there were 135holders of record of our common shares and, we believe, over 2,200beneficial owners of our common shares.

Dividend Policy

To date, we have not paid any dividends on our common shares. Anypayment of dividends in the future is within the discretion of ourboard of directors and will depend on our earnings, if any, our capitalrequirements and financial condition and other relevant factors. Ourboard of directors does not intend to declare any cash or otherdividends in the foreseeable future, but intends instead to retainearnings, if any, for use in our business operations.

RecentSales of Unregistered Securities, Use of Proceeds from RegisteredSecurities

We made the following sales of unregisteredsecurities during the three months ended December 31,2004.

|             |  |                  |             |            |  |                                                                                                          |       |                                  |  |                                                                                       |  |        |   |           |  |        |     |        |  |  |  |  |
|-------------|--|------------------|-------------|------------|--|----------------------------------------------------------------------------------------------------------|-------|----------------------------------|--|---------------------------------------------------------------------------------------|--|--------|---|-----------|--|--------|-----|--------|--|--|--|--|
| Dateof Sale |  | Title ofSecurity |             | NumberSold |  | ConsiderationReceivedandDescription ofUnderwriting or OtherDiscounts toMarketPrice Afforded toPurchasers |       | ExemptionfromRegistrationClaimed |  | If Option, WarrantorConvertible Security,Terms of ExerciseorConversion                |
| 12/16/04    |  |             | CommonStock |       |  |                                                                                                     | 3,525 |                             |  | Stockissued under 1998Performance EquityPlan – nocashconsideration receivedbyus |  |   | 4 | (2)  |  |   | N/A |   |
|             |

|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| Item6.  | MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

Forward-LookingStatements

When used in this Form 10-KSB and in future filingsby us with the Commission, the words or phrases "willlikely result," "managementexpects" or "we expect,""will continue," "isanticipated," 

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"estimated" orsimilar expressions are intended to identify"forward-looking statements" within themeaning of the Private Securities Litigation Reform Act of 1995.Readers are cautioned not to place undue reliance on any suchforward-looking statements, each of which speak only as of the datemade. As such statements are subject to certain risks and uncertaintiesthat could cause actual results to differ materially from historicalearnings and those presently anticipated or projected. The risks areincluded in "Item 1: Business,—RiskFactors" and "Item 6: Management'sDiscussion and Analysis of Financial Condition and Results ofOperations" included in this Form 10-KSB. We have noobligation to publicly release the result of any revisions, which maybe made to any forward-looking statements to reflect anticipated orunanticipated events or circumstances occurring after the date of suchstatements.

You should read the financial information set forthbelow in conjunction with our financial statements and notes. Except asotherwise indicated, the following discussion does not include theresults of operations of Kolar, Inc., which have been reclassified asdiscontinued operations.

Business Operations

Ouroperations consist of the design and production of complex aerospacestructural assemblies under U.S. government and commercial contracts.We compete with other prime contractors to win contracts through aprocess of competitive bidding. After winning a contract, the length ofthe contract varies but is typically between one and two years for U.S.government contracts, although recent large government contracts havebeen for periods up to 10 years, as is the case with the T-38Propulsion Modification Program, and up to 10 years for commercialcontracts. Except in cases where contract terms permit us to bill on aprogress basis, we must incur upfront costs in producing assemblies andbill our customers upon delivery. Because of the upfront costsincurred, the timing of our billings and the nature of thepercentage-of-completion method of accounting described below, therecan be a significant disparity between the period in which (a) costsare expended, (b) revenue and earnings are recorded and (c) cash isreceived.

Critical Accounting Policies

RevenueRecognition

We recognize revenue from our contracts over thecontractual period under the percentage-of-completion (POC) method ofaccounting. Under the POC method of accounting, sales and gross profitare recognized as work is performed based on the relationship betweenactual costs incurred and total estimated costs at the completion ofthe contract. Recognized revenues that will not be billed under theterms of the contract until a later date are recorded as an assetcaptioned "Costs and estimated earnings in excess ofbillings on uncompleted contracts." Contracts wherebillings to date have exceeded recognized revenues are recorded as aliability captioned "Billings in excess of costs andestimated earnings on uncompleted contracts." Changes tothe original estimates may be required during the life of the contract.Estimates are reviewed monthly and the effect of any change in theestimated gross margin percentage for a contract is reflected in costof sales in the period the change becomes known. The use of the POCmethod of accounting involves considerable use of estimates indetermining revenues, costs and profits and in assigning the amounts toaccounting periods. As a result, there can be a significant disparitybetween earnings (both for accounting and taxes) as reported and actualcash received by us during any reporting period. We continuallyevaluate all of the issues related to the assumptions, risks anduncertainties inherent with the application of the POC method ofaccounting; however, we cannot assure you that our estimates will beaccurate. If our estimates are not accurate or a contract isterminated, we will be forced to adjust revenue in later periods.Furthermore, even if our estimates are accurate, we may have ashortfall in our cash flow and we may need to borrow money to pay taxesuntil the reported earnings materialize to actual cashreceipts.

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Results of Operations

YearEnded December 31, 2004 as Compared to the Year Ended December 31,2003

Revenue. Our revenue for the year ended December31, 2004 was $30,269,030 compared to $27,288,035 for 2003, representingan increase of $2,980,995 or 11%. This increase was due to ourcompany winning more than 200 new contract awards in 2004 totaling$17.9 million.

Gross profit. Gross profit for the yearended December 31, 2004 was $10,295,799, compared to $9,004,783 for2003, an increase of $1,291,016 or 14%. Gross profit as apercentage of revenue for the year ended December 31, 2004 was34% compared to 33% for the same period last year, dueprimarily to a more profitable sales mix.

Selling, generaland administrative expenses. Selling, general and administrativeexpenses for the year ended December 31, 2004 were $3,424,953, comparedto $3,177,173 for 2003, an increase of $247,780, or 8%. Thisincrease is primarily attributable to costs of approximately $102,000incurred due to the relocation of our facilities, an increase of$80,000 in salaries due to the hiring of additional administrativeemployees and an increase of approximately $70,000 in travel costs.

Interest Expense. Interest expense for the year endedDecember 31, 2004 was $8,109, compared to $148,006 for 2003, a decreaseof $139,897, or 95%. The decrease in interest expense resultedfrom the repayment of debt using the proceeds of our February 2003public offering.

Income from continuing operations.Income from continuing operations for the year ended December 31, 2004was $6,870,031 compared to income from continuing operations for theyear ended December 31, 2003 of $8,127,043 which includes a gain onextinguishment of debt of $2,431,233, a decrease of $1,257,012 or15%. The 2004 results include income taxes computed at aneffective tax rate of 26% because we utilized all of ourremaining net operating loss carryforward for federal income taxpurposes, approximately $4,400,000. Basic income per share for the yearended December 31, 2004 was $0.94 on an average of 5,386,595 sharesoutstanding, compared to $1.63 per share from continuing operations onan average of 4,872,255 shares outstanding for the year ended December31, 2003.

Liquidity and Capital Resources

General

At December 31, 2004, we had working capitalof $24,396,402 compared to $19,319,374 at December 31, 2003, anincrease of $5,077,028. This increase is primarily attributable to anincrease in costs and estimated earnings in excess of billings onuncompleted contracts of approximately $8,580,620. The increase incosts and estimated earnings in excess of billings on uncompletedcontracts is attributable to more contracts at December 31, 2004 ascompared to 2003.

Net cash used in operating activities for theyear ended December 31, 2004 was $560,768 compared to net cash used inoperating activities of $663,789 for the year ended December 31, 2003.This decrease in cash was due to net income from continuing operationsof $5,076,031, depreciation and amortization of $184,355, deferredportion of provision for income taxes of $1,202,000, a tax benefit forstock options of $421,000, a decrease in accounts receivable of$106,822, a decrease in prepaid expenses of $167,326, an increase inaccounts payable and accrued expenses of $971,643, and an decrease inincome taxes payable of $58,000. This decrease was offset by anincrease in costs and estimated earnings in excess of billings onuncompleted contracts of $8,580,620.

On a rolling basis, thereis a portion of our "costs and estimated earnings inexcess of billings on uncompleted contracts" that we donot expect to be able to collect within the next year. The amount notexpected to be collected within one year was approximately $1,866,000at December 31, 2003 and approximately $1,243,000 at December 31, 2004.These amounts relate to the start up expenses incurred in 1989 and1990, in the early stages of our one remaining commercial contract. Aswe near the completion of this contract, we will bill and collect morethan our expenses. Thus, we anticipate that the amount not expected tobe collected within one year will decrease through the completion ofthis contract, which is estimated to be in 2012.

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Cash Flow

Because the POCmethod of accounting requires us to use estimates in determiningrevenues, costs and profits and in assigning the amounts to accountingperiods, there can be a significant disparity between earnings (bothfor accounting and taxes) as reported and actual cash received by usduring any reporting period. Accordingly, it is possible that we mayhave a shortfall in our cash flow and may need to borrow money untilthe reported earnings materialize to actual cash receipts.

Public Offering

On February 19, 2003, we consummated apublic offering of 2,300,000 of our common shares at a price of $4.00per share raising proceeds of $7,700,000, net of offering expenses. Weused approximately $2.4 million of the net proceeds to repay bank loansand $2.7 million to repurchase a promissory note held by a third partyin the principal and accrued interest amount of $5.1 million. Theremaining approximately $2.6 million of net proceeds has been used forworking capital. As a result, since February 2003, we have had nomaterial bank debt.

JP Morgan Chase Credit Facility

In September 2003, we entered into a three-year, $5 millionrevolving credit facility with JP Morgan Chase Bank, secured by ourassets. The facility specifies interest rates that range between thePrime Rate and 225 basis points over LIBOR, depending on certain termsand conditions. As of December 31, 2004, we had not borrowed any fundspursuant to this facility.

We believe that our existingresources, together with the availability under our credit facility,will be sufficient to meet our current working capital needs for atleast the next 12 months.

Contractual Obligations

The table below summarizes information about our contractualobligations as of December 31, 2004 and the effects these obligationsare expected to have on our liquidity and cash flow in the futureyears.

|                                   |  |                          |           |                  |  |          |           |           |  |              |           |        |  |        |         |        |  |        |           |        |  |  |
|-----------------------------------|--|--------------------------|-----------|------------------|--|----------|-----------|-----------|--|--------------|-----------|--------|--|--------|---------|--------|--|--------|-----------|--------|--|--|
|                              |  | PaymentsDue By Period($) |
| ContractualObligations            |  | Total                    |           | Less than 1 year |  | 1-3years |           | 4-5 years |  | After 5years |
| Short-TermDebt                    |  |                     | -0-       |             |  |     | -0-       |      |  |         | -0-       |   |  |   | -0-     |   |  |   | -0-       |   |
| CapitalLeaseObligations           |  |                     | 212,420   |             |  |     | 83,144    |      |  |         | 129,276   |   |  |   | -0-     |   |  |   | -0-       |   |
| OperatingLeases                   |  |                     | 4,298,955 |             |  |     | 375,000   |      |  |         | 784,088   |   |  |   | 831,838 |   |  |   | 2,308,029 |   |
| EmploymentAgreementCompensation** |  |                     | 2,114,666 |             |  |     | 860,646   |      |  |         | 1,254,020 |   |  |   | -0-     |   |  |   | -0-       |   |
| TotalContractual CashObligations  |  |                     | 6,626,041 |             |  |     | 1,318,790 |      |  |         | 2,167,384 |   |  |   | 831,838 |   |  |   | 2,308,029 |   |
|                                   |

|    |                                                                                          |
|----|------------------------------------------------------------------------------------------|
| ** | Theemployment agreements provide for bonus payments that are excluded fromthese amounts. |

Inflation

Inflationhistorically has not had a material effect on our operations.

Item 7.    FINANCIAL STATEMENTS

(a)    FinancialStatements

This information appears following Item 14 of thisReport and is incorporated herein by reference.

|              |                                                                                     |
|--------------|-------------------------------------------------------------------------------------|
| Item8.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE |

None.

Item8A.    CONTROLS AND PROCEDURES

An evaluation of theeffectiveness of our disclosure controls and procedures was made as ofDecember 31, 2004 under the supervision and with the participation ofour management, including our 

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chief executive officer and chief financialofficer. Based on that evaluation, we concluded that our disclosurecontrols and procedures are effective to ensure that informationrequired to be disclosed by us in reports that we file or submit underthe Securities Exchange Act of 1934 is recorded, processed, summarizedand reported within the time periods specified in Securities andExchange Commission rules and forms. During the most recently completedfiscal quarter, there has been no change in our internal control overfinancial reporting that has materially affected, or is reasonablylikely to materially affect, our internal control over financialreporting.

Item 8B.    OTHER INFORMATION

None.

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PART III

|                                       |                                                   |
|---------------------------------------|---------------------------------------------------|
| Item 9.      | DIRECTORS AND EXECUTIVE OFFICERSOF THE REGISTRANT |

Our directors and executive officers are asfollows:

|                            |  |        |        |          |  |                                                   |  |  |  |  |
|----------------------------|--|--------|--------|----------|--|---------------------------------------------------|--|--|--|--|
| Name                       |  | Age    |        | Position |
| EricRosenfeld(1)(2)(4)     |  |   | 47     |     |  | Chairmanof the Board of Directors (non-executive) |
| Edward J.Fred (1)          |  |   | 46     |     |  | Chief Executive Officer, President andDirector    |
| Arthur August(1)           |  |   | 70     |     |  | Chairman Emeritus andDirector                     |
| Vincent Palazzolo          |  |   | 41     |     |  | ChiefFinancial Officer                            |
| Walter Paulick(2)(3)(4)    |  |   | 58     |     |  | Director                                          |
| KennethMcSweeney (2)(3)(4) |  |   | 73     |     |  | Director                                          |
| A.C. Providenti(3)         |  |   | 67     |     |  | Director                                          |
| **KeyEmployee**            |  |   |   |     |  |                                              |
| FrankFunicelli             |  |   | 62     |     |  | Senior Vice President, BusinessDevelopment        |
|                            |

|  |
|--|
|  |  |
|  |

|     |                                        |
|-----|----------------------------------------|
| (1) | Memberof strategic planning committee. |

|     |                                  |
|-----|----------------------------------|
| (2) | Member ofcompensation committee. |

|     |                           |
|-----|---------------------------|
| (3) | Member of auditcommittee. |

|     |                                |
|-----|--------------------------------|
| (4) | Member of nominatingcommittee. |

**Eric Rosenfeld** has been the non-executivechairman of our board of directors since January 2005 and a directorand chairman of our strategic planning committee since April 2003. Mr.Rosenfeld has been the president and chief executive officer ofCrescendo Partners, L.P., a New York-based investment firm, since itsformation in November 1998. Prior to forming Crescendo Partners, Mr.Rosenfeld had been managing director at CIBC Oppenheimer and itspredecessor company Oppenheimer & Co., Inc. for fourteen years. Hewas also chairman of the board of Spar Aerospace Limited, a companythat provides repair and overhaul services for aircraft and helicoptersused by governments and commercial airlines, from May 1999 throughNovember 2001, until its sale to L-3 Communications. Since April 2004,Mr. Rosenfeld also has been chairman, president and chief executiveofficer of Arpeggio Acquisition Corporation, a company thatsuccessfully completed an initial public offering in June 2004 and isseeking to effect a merger or business combination with an operatingbusiness in the U.S. or Canada. He is also a director of Sierra SystemsGroup, Inc., a Toronto Stock Exchange-listed information technology,management consulting and systems integration firm based in Canada, adirector of Emergis Inc., a Toronto Stock Exchange-listed company thatenables the electronic processing of transactions in the finance andhealthcare industries, and a director of Hip Interactive, a TorontoStock Exchange-listed company that distributes and develops electronicentertainment products. Mr. Rosenfeld recently served as a director ofAD OPT Technologies Inc., which was a Toronto Stock Exchange-listedcompany until it was acquired by Kronos Inc. in November 2004. Mr.Rosenfeld recently served as a director and head of the specialcommittee of Pivotal Corporation, a Canadian based customer relationsmanagement software company that was sold to chinadotcom in February2004. Mr. Rosenfeld is a regular guest lecturer at Columbia BusinessSchool and has served on numerous panels at Queen's UniversityBusiness Law School Symposia, McGill Law School and the WorldPresidents' Organization. He also has been a regular guest hoston CNBC. Mr. Rosenfeld received an M.B.A. from Harvard University andan A.B. degree in economics from Brown University.

16

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**Edward J. Fred** has been an officersince February 1995 and a member of our board of directors sinceJanuary 1999. He was our controller from February 1995 to April 1998,when he was appointed chief financial officer, a position he held untilJune 2003 and then from January 2004 to May 2004. He was executive vicepresident from May 2000 until December 2001 and was appointed to theposition of president in January 2002 and to the position of chiefexecutive officer in January 2003. For approximately ten years prior tojoining our company, Mr. Fred served in various positions for theinternational division of Grumman, where he last held the position ofcontroller. Mr. Fred holds a Bachelor of Business Administration inAccounting from Dowling College and an Executive MBA from HofstraUniversity.

**Arthur August**, one of our founders, has beenour chairman emeritus since January 2005 and a director since January1980. From January 1980 until December 2004, he was chairman of theboard of directors and was our president until December 2001 and ourchief executive officer until December 2002. From 1956 to 1979, Mr.August was employed by Northrop Grumman Corporation where he last heldthe position of deputy director. Mr. August holds a certificate inAeronautical Design from the Academy of Aeronautics, a Bachelor ofScience degree in Industrial Management from C. W. Post College, aMasters degree in Engineering from New York University and is agraduate of the Program for Management Development at the HarvardGraduate School of Business.

**Vincent Palazzolo**has beenour chief financial officer since May 2004. From December 2003 to May2004, he was employed by JH Cohn, LLP as an audit partner. From 1988through November 2003, Mr. Palazzolo was employed by Goldstein GolubKessler LLP ("GGK"), where he was an auditpartner from September 1999 through November 2003. While employed byGGK, from September 1999 to November 2003, Mr. Palazzolo also served asa managing director of American Express Tax and Business Services, Inc.Mr. Palazzolo holds a Bachelor of Business Administration in Accountingfrom Hofstra University, is a certified public accountant and is amember of the American Institute of Certified Public Accountants andthe New York State Society of Certified Public Accountants.

**Walter Paulick** has been a director since April 1992 andchairman of our nominating committee since March 2004. Mr. Paulick iscurrently a self-employed financial consultant. From 1982 to November1992, Mr. Paulick was a vice president of Parr Development Company,Inc., a real estate development company. From 1980 to 1982, Mr. Paulickwas employed by Key Bank, where he last held the position of vicepresident. From 1971 to 1980, Mr. Paulick was a vice president ofNational Westminster U.S.A. Mr. Paulick holds an associate degree inApplied Science from Suffolk Community College and Bachelor of BusinessAdministration from Dowling College.

**Kenneth McSweeney**has been a director since February 1998 and chairman of ourcompensation committee since April 2003. Mr. McSweeney has been anindependent consultant to the aerospace industry since January 1995.From 1961 to 1995, Mr. McSweeney served in various management positionsfor Northrop Grumman Corporation, most recently as the vice presidentof its Aerostructures Division and a director of business developmentfor the Mideast and gulf coast region. Mr. McSweeney has extensiveexperience in aerostructures and logistics support products and is alicensed professional engineer in New York State. He holds Bachelor andMaster of Science degrees in Electrical Engineering from thePolytechnic Institute of Brooklyn and a Masters degree in BusinessManagement from CW Post College. He also completed the ExecutiveDevelopment Program at the Cornell School of Business and PublicAdministration.

**A. C. Providenti** has been a director andchairman of our audit committee since February 2003. Since 1984, Mr.Providenti has served as president of A.C. Providenti & Associates,Ltd., a consulting and strategic advisory firm. From 1977 to 1984, Mr.Providenti served as senior vice president for finance andadministration and as an executive committee member for NorthvilleIndustries Corp., a multinational petroleum storage, trading anddistribution company. Mr. Providenti holds a Bachelor's degree inAccounting from St. Francis College and a Masters of BusinessAdministration from Fordham University.

**Frank Funicelli**has been with us since March 1988, serving as our Director ofOperations from 1988 to 1995, our vice president of operations from1995 to 2002, and our vice president of business development from 2002to December 2003 and became our senior vice president, business

17

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development in January 2004. From 1977 to1988, was employed by Fairchild Republic Company where he served asChief Industrial Engineer, Manufacturing Engineering Manager andDirector of Program Planning and Control. From 1966 to 1977, he waswith Grumman Aerospace where he served as Industrial Engineer, Managerof Manufacturing Planning and Control and Program Planning and ResourceControl Manager. Mr. Funicelli holds a Bachelor of Science degree inIndustrial Engineering from Pratt Institute and a Master of Science inManagement Engineering from C.W. Post College.

Our board ofdirectors is divided into three classes with only one class ofdirectors being elected in each year and each class serving athree-year term. The term of office of the first class of directors(Class I), consisting of Kenneth McSweeney and A.C. Providenti, willexpire at our annual meeting in 2005. The term of office of the secondclass of directors (Class II), consisting of Walter Paulick and EricRosenfeld, will expire at our annual meeting in 2006. The term ofoffice of the third class of directors (Class III), consisting ofArthur August and Edward J. Fred, will expire at our annual meeting in2007.

Section 16(a) Beneficial Ownership ReportingCompliance

Section 16(a) of the Securities Exchange Act of 1934requires our officers, directors and persons who own more than tenpercent of a registered class of our equity securities to file reportsof ownership and changes in ownership with the Securities and ExchangeCommission. Officers, directors and ten percent stockholders arerequired by regulation to furnish us with copies of all Section 16(a)forms they file. Based solely on copies of such forms received orwritten representations from certain reporting persons that no Form 5swere required for those persons, we believe that, during the fiscalyear ended December 31, 2004, all filing requirements applicable to ourofficers, directors and greater than ten percent beneficial owners werecomplied with, except that Arthur August filed two Form 4s late, one ofwhich disclosed one option exercise transaction and one of whichdisclosed five open market sale transactions, and each of Messrs.Rosenfeld, McSweeney, Paulick and Providenti filed one Form 4 latedisclosing one option grant transaction.

Audit CommitteeFinancial Expert

Currently, our audit committee is comprised ofWalter Paulick, Kenneth McSweeney and A.C. Providenti, with Mr.Providenti serving as the chairman of the audit committee. The board ofdirectors believes that Mr. Providenti is an "auditcommittee financial expert" (as defined in Regulation228.401(e)(1)(i)(A) of Regulation S-B). The board of directors alsobelieves that Mr. Providenti would be considered an"independent" director under Item 7(d)(3)(iv)of Schedule 14A of the Securities Exchange Act of 1934.

Code ofEthics

In March 2004, our board of directors adopted a writtencode of ethics that applies to our directors, officers and employees. Acopy of our code of ethics was filed as Exhibit 14 to our Annual Reporton Form 10-KSB for the year ended December 31, 2003. Requests forcopies of our code of ethics should be sent in writing to CPIAerostructures, Inc., 60 Heartland Blvd., Edgewood, NY 11717,Attention: Corporate Secretary.

18

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Item 10.    EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earnedby, or paid for all services rendered to us during the fiscal yearsended December 31, 2004, 2003 and 2002, by our chief executive officerand our other executive officers whose total compensation exceeded$100,000 during the year ended December 31, 2004 ("NamedExecutive Officers").

|                          |  |        |        |        |  |                                                                                         |  |                                                                             |  |        |         |        |  |  |  |  |  |  |
|--------------------------|--|--------|--------|--------|--|-----------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------|--|--------|---------|--------|--|--|--|--|--|--|
| Name/Position            |  | Year   |        | Salary |  | Bonus                                                                                   |  | Long-TermCompensationSecuritiesUnderlyingOptions/SARs(#)                    |
|                     |  |   |   |   |  |                                                                                    |  |                                                                        |  |   |    |   |
| EdwardJ.Fred             |  |   | 2004   |   |  | $243,908                                                                                |  | $203,041                                                                    |  |   | -0-     |   |
| ChiefExecutiveOfficer    |  |   | 2003   |   |  | $228,242                                                                                |  | $174,800                                                                    |  |   | -0-     |   |
| President                |  |   | 2002   |   |  | $209,287                                                                                |  | $90,330                                                                     |  |   | 100,000 |   |
|                     |  |   |   |   |  |                                                                                    |  |                                                                        |  |   |    |   |
| ArthurAugust             |  |   | 2004   |   |  | $122,157                                                                                |  | $101,521                                                                    |  |   | -0-     |   |
| ChairmanEmeritus         |  |   | 2003   |   |  | $126,612                                                                                |  | $184,000                                                                    |  |   | -0-     |   |
|                     |  |   | 2002   |   |  | $317,237                                                                                |  | $180,660                                                                    |  |   | 85,000  |   |
|                     |  |   |   |   |  |                                                                                    |  |                                                                        |  |   |    |   |
| VincentPalazzolo         |  |   | 2004   |   |  | $110,485                                                                                |  | $31,725                                                                     |  |   | 50,000  |   |
| ChiefFinancialOfficer(1) |  |   | 2003   |   |  |               -0- |  |             -0- |  |   | -0-     |   |
|                     |  |   | 2002   |   |  |               -0- |  |             -0- |  |   | -0-     |   |
|                          |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------|
| (1) | Mr.Palazzolo became employed as our chief financial officer on May 17,2004 at an annual base salary of $175,000. |

Option Grantsin2004

|                  |  |                                                  |        |                                                       |  |                        |                         |                |  |        |        |        |           |        |        |        |  |  |
|------------------|--|--------------------------------------------------|--------|-------------------------------------------------------|--|------------------------|-------------------------|----------------|--|--------|--------|--------|-----------|--------|--------|--------|--|--|
|             |  | Numberof SecuritiesUnderlying Options Granted(#) |        | Percent ofOptions Granted toEmployees inFiscalYear(1) |  | ExercisePrice($/Share) |                         | ExpirationDate |
|             |  |                                             |   |                                                  |  |                   |                    |           |  |   |   |   |           |   |   |   |
| VincentPalazzolo |  |                                             | 50,000 |                                                  |  |                   | 66   2/3 | %         |  | $10.48 |        |   | 5/16/2014 |   |
|                  |

|  |
|--|
|  |  |
|  |

|     |                                                                                             |
|-----|---------------------------------------------------------------------------------------------|
| (1) | Wegranted a total of 75,000 options to employees in the fiscal year endedDecember 31, 2004. |

Aggregated Option Exercises and OptionValues

|                  |  |                               |  |               |  |                                                                                                |  |                                                                                           |  |  |  |  |  |  |  |  |  |  |
|------------------|--|-------------------------------|--|---------------|--|------------------------------------------------------------------------------------------------|--|-------------------------------------------------------------------------------------------|--|--|--|--|--|--|--|--|--|--|
| Name             |  | SharesAcquiredon Exercise (#) |  | ValueRealized |  | Numberof Securities Underlying Unexercised Optionsat December 31,2004Exercisable/Unexercisable |  | Value ofUnexercisedIn-The-Money OptionsAt December 31,2004($)Exercisable/Unexercisable(1) |
|             |  |                          |  |          |  |                                                                                           |  |                                                                                      |
| EdwardJ.Fred     |  | -0-                           |  | -0-           |  | 398,334/0                                                                                      |  | $2,820,553/0                                                                              |
|             |  |                          |  |          |  |                                                                                           |  |                                                                                      |
| ArthurAugust     |  | 115,000                       |  | $871,150      |  | 385,000/0                                                                                      |  | $2,818,550/0                                                                              |
|             |  |                          |  |          |  |                                                                                           |  |                                                                                      |
| VincentPalazzolo |  | -0-                           |  | -0-           |  | 50,000/0                                                                                       |  | $0/0                                                                                      |
|             |  |                          |  |          |  |                                                                                           |  |                                                                                      |
|                  |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Thesevalues are based on the difference between the closing sale price ofour common stock on December 31, 2004 of $11.45 and the exercise priceof the options. |

19

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Employment Agreements

Edward J. Fred

In February 2005, we enteredinto an amended and restated employment agreement with Edward J. Fred,which provides for Mr. Fred to serve as our President and ChiefExecutive Officer until December 31, 2007. Mr. Fred's annual basesalary is currently $252,000 and will increase to $267,120 on January1, 2006 and to $283,150 on January 1, 2007. In addition, Mr. Fred iseligible to receive an annual bonus, which for the year ended December31, 2004 was equal to 4% of our consolidated net income. For theyears ending December 31, 2005, 2006 and 2007, Mr. Fred's annualbonus will be based on changes in our revenues and earnings beforeinterest, taxes, depreciation and amortization("EBITDA") from the prior year. 25% ofthe bonus amount is determined by revenues and 75% by EBITDA. Tothe extent that a 10% annual increase in revenues and EBITDAfrom the prior year is achieved, Mr. Fred will be entitled to a targetannual bonus equal to 65% of his annual base salary. Should therevenue and/or EBITDA levels fall short of or exceed a 10%increase from the prior year, Mr. Fred's bonus will decrease orincrease by predetermined percentages. If there is more than a15% annual decrease in EBITDA or revenues, no EBITDA bonus orrevenue bonus will be paid. If there is an annual increase of100% or more in EBITDA or revenues, Mr. Fred's EBITDAbonus or revenue bonus will be 75% more than the target annualbonus. Both bonuses will be adjusted pro rata if EBITDA and/or revenuesfall in between two designated percentages. The first $140,000 of bonuswill be paid in cash and the balance will be paid half in cash and halfin shares of our common stock. The shares of common stock will bevalued at the average of the last sale prices of the common stock forfive consecutive trading days ending two trading days before issuance.Pursuant to the terms of Mr. Fred's employment agreement, if achange of control (as such term is defined in the agreement) occursprior to a termination by us without "cause"or by Mr. Fred for "good reason" (as suchterms are defined in the agreement), we must pay him a lump sum equalto three times the total compensation (including salary and bonus)earned by him during the last full calendar year of his employment. Mr.Fred also has agreed not to compete with us during the term of hisemployment and for two years thereafter.

ArthurAugust

Under the terms of Mr. August's employmentagreement, as amended, effective January 2005, he became our chairmanemeritus and will serve in that position until December 31, 2005 andreceive an annual base salary of $60,000. For the year ended December31, 2004, Mr. August received an annual bonus equal to 2% of ourconsolidated net income. Mr. August is not entitled to receive anybonus for the year ending December 31, 2005. Mr. August is required todevote only such time to our business as he, in his sole discretion,deems necessary. Pursuant to the terms of Mr. August's employmentagreement, if a change of control (as such term is defined in theagreement) occurs prior to a termination by us without"cause" or by Mr. August for"good reason" (as such terms are defined inthe agreement), we must pay him a lump sum equal to three times thetotal compensation (including salary and bonus) earned by him duringthe last full calendar year of his employment. Mr. August has agreednot to compete with us during the term of his employment and for fiveyears thereafter. As consideration for his agreement not to competewith us for an extended period of time, we agreed to pay Mr. August$300,000 in five, equal annual installments of $60,000 commencing onJanuary 1, 2006.

Vincent Palazzolo

InFebruary 2005, we entered into an amended and restated employmentagreement with Vincent Palazzolo, which provides for Mr. Palazzolo toserve as our Chief Financial Officer until December 31, 2006. Mr.Palazzolo's annual base salary is currently $175,000 and willincrease to $183,750 on August 1, 2005. In addition, Mr. Palazzolo iseligible to receive an annual bonus, which for the year ended December31, 2004 was equal to 1% of our consolidated net income. For theyears ending December 31, 2005 and 2006, Mr. Palazzolo's annualbonus will be based on changes in our revenues and EBITDA from theprior year. 25% of the bonus amount is determined by revenuesand 75% by EBITDA. To the extent that a 10% annualincrease in revenues and EBITDA from the prior year is 

20

----

achieved, Mr. Palazzolo will be entitled to atarget annual bonus equal to 45% of his annual base salary.Should the revenue and/or EBITDA levels fall short of or exceed a10% increase from the prior year, Mr. Palazzolo's bonuswill decrease or increase by predetermined percentages. If there ismore than a 15% annual decrease in EBITDA or revenues, no EBITDAbonus or revenue bonus will be paid. If there is an annual increase of100% or more in EBITDA or revenues, Mr. Palazzolo's EBITDAbonus or revenue bonus will be 75% more than the target annualbonus. Both bonuses will be adjusted pro rata if EBITDA and/or revenuesfall in between two designated percentages. The first $75,000 of bonuswill be paid in cash and the balance will be paid half in cash and halfin shares of our common stock. The shares of common stock will bevalued at the average of the last sale prices of the common stock forfive consecutive trading days ending two trading days before issuance.Pursuant to the terms of Mr. Palazzolo's employment agreement, ifa change of control (as such term is defined in the agreement) occursprior to a termination by us without "cause"or by Mr. Palazzolo for "good reason" (assuch terms are defined in the agreement), Mr. Palazzolo may elect toreceive a lump sum equal to $50,000 within 10 days of such election inlieu of his compensation and benefits under the employment agreement.Mr. Palazzolo also has agreed not to compete with us during the term ofhis employment and for two years thereafter.

CompensationArrangements for Directors

Each of our non-employee directorsreceives an annual cash fee of $10,000 (payable quarterly) and isgranted options to purchase 10,000 common shares on April1st of each year. The chairman of the audit committeereceives an additional annual cash fee of $20,000 (payable quarterly)and is granted an additional 15,000 options on April 1st ofeach year and the chairman of the strategic planning committee receivesan additional cash fee of $10,000 payable quarterly. Effective January1, 2005, the chairman of the board will be paid an additional cash feeof $40,000 (payable quarterly) and be granted an additional 25,000options each year. Our directors will continue to be reimbursed for thereasonable expenses they incur in attending meetings.

EmployeeBenefit Plans

In October 2000, we adopted the Greit Plan forthe purpose of offering senior management a deferred compensation deathbenefit plan that would provide a tax-free benefit for seniormanagement and which would be tax-neutral to us. Pursuant to the plan,we made a non-interest bearing loan to Arthur August in the amount of$150,000, which Mr. August used to purchase a Greit Plan. This plan hassince been terminated and the surrender value of the Greit Plan hasbeen returned to Mr. August. Mr. August has placed the proceeds fromthe surrender value in an annuity in our name, which will appreciate toat least $150,000 by September 2011 in order to repay the loan made tohim. Mr. August also assigned to us an insurance policy on his life inthe amount of $150,000 and agreed to maintain it until the date uponwhich the annuity matures. Accordingly, the loan to Mr. August will berepaid upon the maturity date of the annuity or upon the death of Mr.August, whichever occurs first.

Stock Options

Performance Equity Plan 2000

ThePerformance Equity Plan 2000 authorizes the grant of 830,000 stockoptions, stock appreciation rights, restricted stock, deferred stock,stock reload options, and other stock based awards. As of December 31,2004 options to purchase an aggregate of 810,000 common shares had beengranted under this plan of which 700,750 options remain outstanding atexercise prices ranging from $1.20 to $10.24 per share. As of March 24,2005, options to purchase 25,000 common shares remain available forgrant.

1998 Performance Equity Plan

The1998 Performance Equity Plan authorizes the grant of 463,334 stockoptions, stock appreciation rights, restricted stock, deferred stock,stock reload options, and other stock based 

21

----

awards. As of December 31, 2004, options topurchase an aggregate of 452,668 common shares had been granted, ofwhich 215,334 remain outstanding at exercise prices ranging from $2.53to $11.31 per share. As of March 24, 2005, options to purchase 10,666common shares remain available for grant.

1995Stock Option Plan

The 1995 Employee Stock Option Planauthorizes the grant of 200,000 stock options and stock appreciationrights. As of December 31, 2004, options to purchase an aggregate of176,190 common shares had been granted, of which 136,668 remainoutstanding at exercise prices ranging from $6.27 to $10.48 per share.As of March 24, 2005, options to purchase 23,810 additional commonshares remain available for grant.

1992Employee Stock Option Plan

The 1992 Employee Stock Option Planauthorized the grant of 83,334 options, all of which have been grantedand 41,002 shares remain outstanding at exercise prices ranging from$2.59 to $6.27 per share. No more shares may be granted under thisplan.

Other Options and Warrants

OnFebruary 19, 2003, we issued to EarlyBirdCapital, Inc. (and itsdesignees) five-year warrants to purchase an aggregate of 200,000common shares as compensation for acting as underwriter for ourFebruary 2003 public offering. The exercise price of the warrants is$4.40 per share. As of December 31, 2004, warrants to purchase 5,000common shares had been exercised.

On February 1, 2002, wegranted to John Aneralla, the stepson of Arthur August, five-yearnon-plan options to purchase 5,000 common shares as compensation forconsulting services. The exercise price of the options is $1.65, thefair market value of our common shares on the date of grant. As ofDecember 31, 2004, none of these options had been exercised.

22

----

|               |                                                                                               |
|---------------|-----------------------------------------------------------------------------------------------|
| Item11.  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |

The table andaccompanying footnotes set forth certain information as of March 24,2005, with respect to the ownership of our common shares by:

|  |              |                                                                             |
|--|--------------|-----------------------------------------------------------------------------|
|  | •  | each person or group who beneficiallyowns more than 5% of our commonshares; |

|  |              |                       |
|--|--------------|-----------------------|
|  | •  | each of ourdirectors; |

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | each of our NamedExecutive Officers; and |

|  |              |                                                        |
|--|--------------|--------------------------------------------------------|
|  | •  | all of ourdirectors and executive officers as a group. |

A person is deemedto be the beneficial owner of securities that can be acquired by theperson within 60 days from the record date upon the exercise ofwarrants or options. Accordingly, common shares issuable upon exerciseof options and warrants that are currently exercisable or exercisablewithin 60 days of March 24, 2005 have been included in the table withrespect to the beneficial ownership of the person owning the options orwarrants, but not with respect to any other persons.

|                                                                      |  |                            |           |                    |  |        |      |         |  |  |
|----------------------------------------------------------------------|--|----------------------------|-----------|--------------------|--|--------|------|---------|--|--|
| Nameand Addressof BeneficialOwner                                    |  | SharesBeneficiallyOwned(1) |           | Percentof Class(2) |
| Edward J.Fred(3)                                                     |  |                       | 403,434   | (4)           |  |   | 6.9  | %  |
| ArthurAugust(3)                                                      |  |                       | 604,419   | (5)           |  |   | 10.4 | %  |
| VincentPalazzolo(3)                                                  |  |                       | 25,000    | (6)           |  |   |      | *  |
| WalterPaulick(3)                                                     |  |                       | 25,000    | (7)           |  |   |      | *  |
| KennethMcSweeney(3)                                                  |  |                       | 28,334    | (8)           |  |   |      | *  |
| A.C.Providenti(3)                                                    |  |                       | 45,000    | (9)           |  |   |      | *  |
| EricRosenfeld                                                        |  |                       | 969,334   | (10)          |  |   | 17.8 | %  |
| c/oCrescendo Partners10 East 53rd Street, 36thfloorNew York, NY10022 |  |
| Royce& Associates,LLC                                            |  |                       | 364,900   | (11)          |  |   | 6.7  | %  |
|     1414Avenue of the AmericasNew York, NY 10019 |  |
| Alldirectors and executive officers as a group (sevenpersons)        |  |                       | 2,100,521 | (12)          |  |   | 33.1 | %  |
|                                                                      |

|  |
|--|
|  |  |
|  |

|   |              |
|---|--------------|
| * | Lessthan 1%. |

|     |                                                                                                                                                                                                                              |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Unless otherwisenoted, we believe that all persons named in the table have sole votingand investment power with respect to all common shares beneficiallyowned by them, subject to community property laws, whereapplicable. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | There are 5,418,400shares currently issued and outstanding. Each person beneficially ownsa percentage of our outstanding common shares equal to a fraction, thenumerator of which is the number of common shares held by such personplus the number of common shares that he can acquire within 60 days ofMarch 24, 2005 upon the exercise or conversion of options, warrants orconvertible securities and the denominator of which is 5,418,400 (thenumber of common shares currently outstanding) plus the number ofshares he can so acquire during such 60-dayperiod. |

|     |                                                                                                                                                           |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Unless otherwise noted,the business address of each of the following persons is c/o CPIAerostructures, Inc., 60 Heartland Blvd., Edgewood, New York11717. |

|     |                                                                                               |
|-----|-----------------------------------------------------------------------------------------------|
| (4) | Includes 398,334 commonshares that Mr. Fred has the right to acquire upon exercise ofoptions. |

|     |                                                                                                                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Includes 385,000 commonshares that Mr. August has the right to acquire upon exercise ofoptions. Excludes an aggregate of 3,034 common shares and 5,000 optionsowned by Mr. August's adult children, all of which shares Mr.August disclaims beneficial ownership. Includes 3,000 common sharesowned by Mr. August's wife. |

23

----

|     |                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Includescommon shares that Mr. Palazzolo has the right to acquire upon exerciseof options. Does not include 25,000 common shares underlying optionsgranted to Mr. Palazzolo that do not become exercisable until May2006. |

|     |                                                                                                                                                                                                         |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Represents common sharesthat Mr. Paulick has the right to acquire upon exercise of options.Does not include 10,000 common shares underlying options that will begranted to Mr. Paulick on April 1,2005. |

|     |                                                                                                                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (8) | Includes 15,000 commonshares that Mr. McSweeney has the right to acquire upon exercise ofoptions. Does not include 10,000 common shares underlying options thatwill be granted to Mr. McSweeney on April 1,2005. |

|     |                                                                                                                                                                                                                               |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (9) | Represents common sharesthat Mr. Providenti has the right to acquire upon exercise of options.Does not include an aggregate of 25,000 common shares underlyingoptions that will be granted to Mr. Providenti on April 1,2005. |

|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10) | Represents (a) 46,000common shares beneficially owned as joint tenants by Mr. Rosenfeld andhis wife; (b) 883,334 shares held by Crescendo Partners II, L.P. SeriesL ("Crescendo Partners  II"); and (c)40,000 common shares that Mr. Rosenfeld has the right to acquire uponexercise of options. Mr. Rosenfeld is the senior managing member of thesole general partner of Crescendo Partners II. Mr. Rosenfeld disclaimsbeneficial ownership of the shares held by Crescendo Partners II,except to the extent of his pecuniary interest therein. Does notinclude 10,000 common shares underlying options that will be granted toMr. Rosenfeld on April 1, 2005. |

|      |                                                                                                                                                                                         |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11) | The information with respect to Royce& Associates, LLC ("Royce") is based uponthe Schedule 13G/A, dated January 21, 2005, filed by Royce with theSecurities and ExchangeCommission. |

|      |                                                                                                                                                                                               |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (12) | Includes anaggregate of 933,334 common shares that Messrs. Fred, August,Palazzolo, Paulick, McSweeney, Providenti and Rosenfeld have the rightto acquire upon exercise of outstandingoptions. |

24

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EquityCompensation Plan Information

The following table sets forthcertain information at December 31, 2004 with respect to our equitycompensation plans that provide for the issuance of options, warrantsor rights to purchase oursecurities.

|                                                             |  |                                                                                           |  |                                                                            |  |                                                                                                                                                |  |  |  |  |  |  |  |  |
|-------------------------------------------------------------|--|-------------------------------------------------------------------------------------------|--|----------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|--|--|
| PlanCategory                                                |  | Number of Securities to beIssued upon Exercise of Outstanding Options, Warrants andRights |  | Weighted-Average Exercise Price of OutstandingOptions, Warrants and Rights |  | Number of SecuritiesRemaining Available for Future Issuance under EquityCompensation Plans (excluding securities reflected in thefirst column) |
| Equity Compensation Plans Approved bySecurityHolders        |  | 1,093,753                                                                                 |  | $4.65                                                                      |  | 59,476                                                                                                                                         |
| EquityCompensation Plans Not Approved by SecurityHolders(1) |  | 200,000                                                                                   |  | $4.33                                                                      |  | -0-                                                                                                                                            |
|                                                             |

|  |
|--|
|  |  |
|  |

|     |                                                                         |
|-----|-------------------------------------------------------------------------|
| (1) | See"Stock Options – Other Options andWarrants" description above. |

Item12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Forinformation concerning employment agreements with, compensation of, andstock options granted to our executive officers and directors, see"Item 10. Executive Compensation."

Prior to our February 2003 public offering, Ralok, Inc. had theright to acquire 333,334 of our common shares by converting a$4,000,000 promissory note it received in connection with our purchaseof Kolar Machine, Inc. Accordingly, Mr. Liguori, the President ofRalok, was deemed the beneficial owner of 10.6% of our commonshares. On February 19, 2003, with the proceeds that we received fromour public offering, we purchased the $4,000,000 convertible promissorynote and accrued interest for $2,700,000 and at that date Mr. Liguoriceased to be deemed a beneficial owner of 10.6% of our commonshares.

Item 13.    EXHIBITS, LIST AND REPORTS ON FORM8-K

(a)Exhibits

|               |  |                                                                                                                                                                                                                             |  |                |  |  |  |  |  |  |
|---------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|----------------|--|--|--|--|--|--|
| ExhibitNumber |  | Name of Exhibit                                                                                                                                                                                                             |  | No. inDocument |
| 1.1           |  | Formof Underwriting Agreement between EarlyBirdCapital, Inc. and theCompany, dated February 12, 2003.(9)                                                                                                                    |  | 1.1            |
| 3.1           |  | Certificateof Incorporation of the Company, as amended.(1)                                                                                                                                                                  |  | 3.1            |
| 3.1(a)        |  | Certificate ofAmendment of Certificate of Incorporation filed on July  14,1998. (3)                                                                                                                                         |  | 3.1(a)         |
| 3.2           |  | Amended andRestated By-Laws of the Company.(12)                                                                                                                                                                             |  | 3.2            |
| 4.7           |  | Form of Warrant issuedto designees of EarlyBirdCapital, Inc., dated February 19, 2003.(11)                                                                                                                                  |  | 4.7            |
| 10.1          |  | 1992 Stock OptionPlan. (1)                                                                                                                                                                                                  |  | 10.3           |
| 10.2          |  | 1995 EmployeeStock Option Plan.(2)                                                                                                                                                                                          |  | 10.4           |
| 10.3          |  | Form of militarycontract. (1)                                                                                                                                                                                               |  | 10.7           |
| 10.4          |  | AssetPurchase Agreement, dated September 9, 1997 by and among Kolar Machine,Inc., a New York corporation, Daniel Liguori, the Company and Kolar,Inc., a Delaware corporation and wholly-owned subsidiary of theCompany. (5) |  | 10.19          |
|               |

Page 25

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|               |  |                                                                                                                                              |  |                |  |  |  |  |  |  |
|---------------|--|----------------------------------------------------------------------------------------------------------------------------------------------|--|----------------|--|--|--|--|--|--|
| ExhibitNumber |  | Name of Exhibit                                                                                                                              |  | No. inDocument |
| 10.5          |  | 1998 Performance EquityPlan. (3)                                                                                                             |  | 10.28          |
| 10.6          |  | PerformanceEquity Plan 2000.(4)                                                                                                              |  | 10.29          |
| *10.7         |  | Stock OptionAgreement, dated August 14, 2001, between Edward J. Fred and theCompany. (5)                                                     |  | 10.35          |
| *10.8         |  | StockOption Agreement, dated August 14, 2001, between Arthur August and theCompany. (6)                                                      |  | 10.36          |
| *10.9         |  | EmploymentAgreement, dated August 14, 2001, between Edward J. Fred and theCompany. (7)                                                       |  | 10.38          |
| *10.10        |  | EmploymentAgreement, dated August 14, 2001, between Arthur August and theCompany. (7)                                                        |  | 10.39          |
| 10.11         |  | AuctionSale Agreement among Kolar, Inc., JP Morgan Chase and JP MorganLeasing, Inc., dated January 10, 2002.(8)                              |  | 10.40          |
| *10.12        |  | Stock OptionAgreement between the Company and Arthur August, dated June 18, 2002.(9)                                                         |  | 10.55          |
| *10.13        |  | Stock OptionAgreement between the Company and Edward J. Fred, dated June 18, 2002.(10)                                                       |  | 10.56          |
| 10.14         |  | Form of Merger& Acquisition Agreement, between EarlyBirdCapital, Inc. and theCompany.(11)                                                |  | 10.26          |
| 10.15         |  | Registration RightsAgreement between the Company and Chemical Investments dated February26, 2002, as assigned to Crescendo Partners, II.(11) |  | 10.27          |
| 10.15.1       |  | Schedule ofOmitted Document in the form of Exhibit 10.16, including materialdetail in which such document differs from Exhibit 10.16.(11)    |  | 10.27.1        |
| *10.16        |  | Letter AgreementAmending Employment Agreement between Edward J. Fred and the Company,dated December 12, 2002(11)                             |  | 10.28          |
| *10.17        |  | Letter AgreementAmending Employment Agreement, between Edward J. Fred and the Company,dated January 1, 2003.(11)                             |  | 10.29          |
| *10.18        |  | Letter AgreementAmending Employment Agreement between Arthur August and the Company,dated January 1, 2003(11)                                |  | 10.30          |
| *10.19        |  | Stock OptionAgreement between Vincent Palazzolo and the Company dated as of May 17,2004 (12)                                                 |  | 10.22          |
| *10.20        |  | LetterAgreement Amending Employment Agreement between Arthur August and theCompany, dated October 28, 2004.(13)                              |  | 10.22          |
| *10.21        |  | Amended andRestated Employment Agreement between Edward J. Fred and the Company,dated February 7, 2005.(14)                                  |  | 10.23          |
| *10.22        |  | Amended andRestated Employment Agreement between Vincent Palazzolo and theCompany, dated February 7, 2005.(14)                               |  | 10.24          |
| 14            |  | Code of BusinessConduct and Ethics(15)                                                                                                       |  | 14             |
| **21          |  | Subsidiaries of theRegistrant.                                                                                                               |  | N/A            |
| **23.1        |  | Consent ofJ.H. Cohn LLP                                                                                                                      |  | N/A            |
| **23.2        |  | Consent ofGoldstein Golub KesslerLLP                                                                                                         |  | N/A            |
| **31.1        |  | Rule13a-14(a)/15d-14(a) Certification of Chief ExecutiveOfficer                                                                              |  | N/A            |
| **31.2        |  | Rule13a-14(a)/15d-14(a) Certification of and Chief FinancialOfficer                                                                          |  | N/A            |
|               |

Page 26

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|               |  |                                                                                                                     |  |                |  |  |  |  |  |  |
|---------------|--|---------------------------------------------------------------------------------------------------------------------|--|----------------|--|--|--|--|--|--|
| ExhibitNumber |  | Name of Exhibit                                                                                                     |  | No. inDocument |
| **32.1        |  | CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act of2002 |  | N/A            |
|               |

|  |
|--|
|  |  |
|  |

|   |                                                 |
|---|-------------------------------------------------|
| * | Managementcompensation contract or arrangement. |

|    |                |
|----|----------------|
| ** | Filedherewith. |

|           |                                                                                                                                                                    |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)  | Filed as an exhibit tothe Company's Registration Statement on Form S-1 (No. 33-49270)declared effective on September 16, 1992 and incorporated herein byreference. |

|           |                                                                                                                                        |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Filed as an exhibit to theCompany's Annual Report on Form 10-KSB for year ended December31, 1995 and incorporated herein by reference. |

|           |                                                                                                                                            |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------|
| (3)  | Filed as an exhibit to the Company'sAnnual Report on Form 10-KSB for the year ended December 31, 1998 andincorporated herein by reference. |

|           |                                                                                                                                           |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------|
| (4)  | Filedas an exhibit to the Company's Annual Report on Form 10-KSB forthe year ended December 31, 2000 and incorporated herein byreference. |

|           |                                                                                                                               |
|-----------|-------------------------------------------------------------------------------------------------------------------------------|
| (5)  | Filed as an exhibit toSchedule 13D filed on behalf of Edward J. Fred on October 19, 2001 andincorporated herein by reference. |

|           |                                                                                                                              |
|-----------|------------------------------------------------------------------------------------------------------------------------------|
| (6)  | Filedas an exhibit to Schedule 13D filed on behalf of Arthur August onOctober 19, 2001 and incorporated herein by reference. |

|           |                                                                                                                                                   |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| (7)  | Filed as an exhibit to the Company'sQuarterly Report on Form 10-QSB for the quarter ended September 30,2001 and incorporated herein by reference. |

|           |                                                                                                                                         |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------|
| (8)  | Filed as an exhibit to the Company'sCurrent Report on Form 8-K dated January 22, 2002, as amended, andincorporated herein by reference. |

|           |                                                                                                                           |
|-----------|---------------------------------------------------------------------------------------------------------------------------|
| (9)  | Filedas an exhibit to Schedule 13D filed on behalf of Arthur August on July12, 2002 and incorporated herein by reference. |

|            |                                                                                                                            |
|------------|----------------------------------------------------------------------------------------------------------------------------|
| (10)  | Filed as an exhibit to Schedule 13D filedon behalf of Edward J. Fred on July 12, 2002 and incorporated herein byreference. |

|            |                                                                                                                                                                      |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (11)  | Filed as an exhibit to theCompany's Registration Statement on Form SB-2 (No. 333-101902)declared effective on February 12, 2003 and incorporated herein byreference. |

|            |                                                                                                                        |
|------------|------------------------------------------------------------------------------------------------------------------------|
| (12)  | Filed as an exhibit to theCompany's Current Report on Form 8-K dated May 24, 2004 andincorporated herein by reference. |

|            |                                                                                                                            |
|------------|----------------------------------------------------------------------------------------------------------------------------|
| (13)  | Filed as an exhibit to the Company'sCurrent Report on Form 8-K dated October 28, 2004 and incorporatedherein by reference. |

|            |                                                                                                                            |
|------------|----------------------------------------------------------------------------------------------------------------------------|
| (14)  | Filed as anexhibit to the Company's Current Report on Form 8-K datedFebruary 7, 2005 and incorporated herein by reference. |

|            |                                                                                                                                            |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| (15)  | Filed as an exhibit to the Company'sAnnual Report on Form 10-KSB for the year ended December 31, 2003 andincorporated herein by reference. |

Page 27

----

(b) Reports on Form 8-K

During thethree months ended December 31, 2004 and through March 25, 2005, wefiled the following Current Reports on Form8-K:

|          |                                                                                                                                                        |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.  | Form 8-K dated October 28, 2004 , andfiled with the SEC on November 1, 2004, which Form 8-K reported eventsunder Items 1.01, 2.02, 5.03, 8.01 and9.01. |

|          |                                                                                                                                       |
|----------|---------------------------------------------------------------------------------------------------------------------------------------|
| 2.  | Form 8-K dated February 7, 2005, andfiled with the SEC on February 10, 2005, which Form 8-K reported eventsunder Items 1.01 and 9.01. |

Item 14.    PRINCIPAL ACCOUNTANTFEES AND SERVICES

Audit and Non-AuditFees

|                   |  |        |         |        |  |        |         |        |  |  |
|-------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|              |  | 2004   |         | 2003   |
| AuditFees(1)      |  | $      | 221,405 |   |  | $      | 164,261 |   |
| Audit-RelatedFees |  |   | -0-     |   |  |   | -0-     |   |
| TaxFees(2)        |  | $      | 20,600  |   |  | $      | 29,024  |   |
| AllOtherFees      |  |   | 31,500  |   |  |   | -0-     |   |
| Total             |  | $      | 273,505 |   |  | $      | 193,285 |   |
|                   |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Representsthe aggregate fees billed for professional services rendered by ourprincipal accountants for the audits of our annual financial statementsfor the years ended December 31, 2004 and December 31, 2003 and reviewof financial statements included in our quarterly reports on Form10-QSB or services that are normally provided by the accountant inconnection with statutory and regulatory filings or engagements forthose periods. |

|     |                                                                                                                                                                                                               |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents the aggregatefees billed for professional services rendered by a company alignedwith our principal accountant for tax compliance, tax advice and taxplanning for the year ended December 31, 2003. |

AuditCommittee Pre-Approval Policies and Procedures

In accordancewith Section 10A(i) of the Securities Exchange Act of 1934, before weengage our independent accountants to render audit or non-auditservices, the engagement is approved by our audit committee. Our auditcommittee approved all of the fees referred to in the sections entitled"Audit Fees," "Audit-RelatedFees," "Tax Fees" and"All Other Fees"above.

Page 28

----

CPIAEROSTRUCTURES, INC.

INDEX TO FINANCIAL STATEMENTS

|                                                                                 |  |            |  |  |  |  |
|---------------------------------------------------------------------------------|--|------------|--|--|--|--|
| **Reportsof Independent Registered Public AccountingFirms**                     |  | F-2        |
|                                                                            |  |
| **Financial Statements:**                                                       |  |
| Balance Sheet as of December 31,2004                                            |  | F-4        |
| Statements of Income for theYears Ended December 31, 2004 and 2003              |  | F-5        |
| Statement of Shareholders' Equity for the Years EndedDecember 31, 2004 and 2003 |  | F-6        |
| Statementsof Cash Flows for the Years Ended December 31, 2004 and2003           |  | F-7        |
| Notes to Financial Statements                                                   |  | F-8 - F-17 |
|                                                                                 |

F-1

----

REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders CPIAerostructures, Inc.

We have audited the accompanyingbalance sheet of CPI Aerostructures, Inc. as of December 31, 2004, andthe related statements of income, changes in shareholders' equityand cash flows for the year then ended. These financial statements arethe responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statementsbased on our audit.

We conducted our audit in accordance withstandards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.

Inour opinion, the financial statements referred to above present fairly,in all material respects, the financial position of CPI Aerostructures,Inc. as of December 31, 2004, and its results of operations and cashflows for the year then ended, in conformity with accounting principlesgenerally accepted in the United States of America.

/s/ J.H. Cohn LLP J.H. Cohn LLP

Jericho,New York March 16, 2005

F-2

----

REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

To the Board of Directors CPIAerostructures, Inc.

We have audited the accompanyingstatements of income, shareholders' equity and cash flows of CPIAerostructures, Inc. for the year ended December 31, 2003. Thesefinancial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

We conducted our auditin accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis forour opinion.

In our opinion, the financial statements referredto above present fairly, in all material respects, the results of theoperations of CPI Aerostructures, Inc. and its cash flows for the yearended December 31, 2003 in conformity with United States generallyaccepted accounting principles.

/s/ Goldstein GolubKessler LLP GOLDSTEIN GOLUB KESSLER LLP New York, NewYork

January 30, 2004

F-3

----

CPIAEROSTRUCTURES, INC.

BALANCE SHEET

December 31,2004

|                                                                                                                      |  |        |            |         |  |  |
|----------------------------------------------------------------------------------------------------------------------|--|--------|------------|---------|--|--|
| **ASSETS**                                                                                                           |  |
| CurrentAssets:                                                                                                       |  |
| Cash                                                                                                                 |  | $      | 1,756,350  |    |
| Accounts receivable                                                                                                  |  |   | 1,641,002  |    |
| Costs and estimated earnings in excess of billings onuncompleted contracts                                           |  |   | 26,030,507 |    |
| Prepaid expenses and other currentassets                                                                             |  |   | 182,003    |    |
| Totalcurrent assets                                                                                                  |  |   | 29,609,862 |    |
| Property, Plantand Equipment, net                                                                                    |  |   | 882,758    |    |
| Other Assets                                                                                                         |  |   | 266,504    |    |
| TotalAssets                                                                                                          |  | $      | 30,759,124 |    |
| **LIABILITIES AND SHAREHOLDERS'EQUITY**                                                                              |  |   |       |    |
| CurrentLiabilities:                                                                                                  |  |   |       |    |
| Accountspayable                                                                                                      |  | $      | 4,332,255  |    |
| Accruedexpenses                                                                                                      |  |   | 525,061    |    |
| Current portion oflong-term debt                                                                                     |  |   | 83,144     |    |
| Deferredincome taxes                                                                                                 |  |   | 144,000    |    |
| Income taxespayable                                                                                                  |  |   | 129,000    |    |
| Total currentliabilities                                                                                             |  |   | 5,213,460  |    |
| Long-term debt,net of current portion                                                                                |  |   | 129,276    |    |
| TotalLiabilities                                                                                                     |  |   | 5,342,736  |    |
| Commitments andContingencies                                                                                         |  |   |       |    |
| Shareholders'Equity:                                                                                                 |  |   |       |    |
| Common stock - $.001 parvalue; authorized 50,000,000 shares, 5,443,415 shares issued and5,412,400 shares outstanding |  |   | 5,443      |    |
| Additional paid-incapital                                                                                            |  |   | 22,541,716 |    |
| Retainedearnings                                                                                                     |  |   | 3,190,085  |    |
| Treasurystock                                                                                                        |  |   | (320,856   | )  |
| TotalShareholders' Equity                                                                                            |  |   | 25,416,388 |    |
| Total Liabilitiesand Shareholders'Equity                                                                             |  | $      | 30,759,124 |    |
|                                                                                                                      |

See Notesto Financial Statements

F-4

----

CPI AEROSTRUCTURES,INC.

STATEMENTS OF INCOME

|                                                                     |  |        |            |         |  |        |            |         |  |  |
|---------------------------------------------------------------------|--|--------|------------|---------|--|--------|------------|---------|--|--|
| Yearended December 31,                                              |  | 2004   |            | 2003    |
| Revenue                                                             |  | $      | 30,269,030 |    |  | $      | 27,288,035 |    |
| Cost of sales                                                       |  |   | 19,973,231 |    |  |   | 18,283,252 |    |
| Grossprofit                                                         |  |   | 10,295,799 |    |  |   | 9,004,783  |    |
| Selling, general and administrativeexpenses                         |  |   | 3,424,953  |    |  |   | 3,177,173  |    |
| Income fromoperations                                               |  |   | 6,870,846  |    |  |   | 5,827,610  |    |
| Other income(expense):                                              |  |   |       |    |  |
| Interest/other income                                               |  |   | 7,294      |    |  |   | 16,206     |    |
| Interestexpense                                                     |  |   | (8,109     | )  |  |   | (148,006   | )  |
| Gain onextinguishment of debt                                       |  |   | —    |    |  |   | 2,431,233  |    |
| Total other income (expense),net                                    |  |   | (815       | )  |  |   | 2,299,433  |    |
| Income fromcontinuing operations                                    |  |   | 6,870,031  |    |  |   | 8,127,043  |    |
| Gain on sale of assets held for sale– discontinued operations |  |   | —    |    |  |   | 461,235    |    |
| Income before provision for incometaxes                             |  | $      | 6,870,031  |    |  | $      | 8,588,278  |    |
| Provision for incometaxes                                           |  |   | (1,794,000 | )  |  |   | (195,000   | )  |
| Netincome                                                           |  | $      | 5,076,031  |    |  | $      | 8,393,278  |    |
| Basicnet income per commonshare:                                    |  |   |       |    |  |
| Incomefrom continuing operations                                    |  | $      | 0.94       |    |  | $      | 1.63       |    |
| Incomefrom discontinued operations                                  |  |   | —    |    |  |   | .09        |    |
| Income per common share –basic                                |  | $      | 0.94       |    |  | $      | 1.72       |    |
| Diluted netincome per commonshare:                                  |  |   |       |    |  |
| Incomefrom continuing operations                                    |  | $      | 0.83       |    |  | $      | 1.47       |    |
| Incomefrom discontinued operations                                  |  |   | —    |    |  |   | .09        |    |
| Income per common share –diluted                              |  | $      | 0.83       |    |  | $      | 1.56       |    |
| Shares usedin computing earnings per commonshare:                   |  |   |       |    |  |
| Basic                                                               |  |   | 5,386,595  |    |  |   | 4,872,255  |    |
| Diluted                                                             |  |   | 6,096,302  |    |  |   | 5,382,266  |    |
|                                                                     |

SeeNotes to Financial Statements

F-5

----

CPI AEROSTRUCTURES, INC.

STATEMENTOF SHAREHOLDERS' EQUITY

Years ended December 31, 2004and 2003

|                                                                                      |  |              |           |        |  |                          |         |                                       |  |               |            |                     |  |        |             |         |  |        |          |         |  |        |            |         |  |  |
|--------------------------------------------------------------------------------------|--|--------------|-----------|--------|--|--------------------------|---------|---------------------------------------|--|---------------|------------|---------------------|--|--------|-------------|---------|--|--------|----------|---------|--|--------|------------|---------|--|--|
|                                                                                 |  | CommonShares |           | Amount |  | AdditionalPaid-inCapital |         | (AccumulatedDeficit)/RetainedEarnings |  | TreasuryStock |            | Shareholders'Equity |
| Balance at January 1,2003                                                            |  |         | 2,785,668 |   |  | $                        | 2,786   |                                  |  | $             | 12,613,974 |                |  | $      | (10,279,224 | )  |  |   | —  |    |  | $      | 2,337,536  |    |
| Netincome                                                                            |  |         | —   |   |  |                     | — |                                  |  |          | —    |                |  |   | 8,393,278   |    |  |   | —  |    |  |   | 8,393,278  |    |
| Amortization of fair value of warrants issued in conjunctionwith consultingagreement |  |         | —   |   |  |                     | — |                                  |  |          | 105,354    |                |  |   | —     |    |  |   | —  |    |  |   | 105,354    |    |
| Common stock issued in secondary publicoffering                                      |  |         | 2,300,000 |   |  |                     | 2,300   |                                  |  |          | 7,756,790  |                |  |   | —     |    |  |   | —  |    |  |   | 7,759,090  |    |
| Common stock issued for bankfees                                                     |  |         | 20,000    |   |  |                     | 20      |                                  |  |          | 88,669     |                |  |   | —     |    |  |   | —  |    |  |   | 88,689     |    |
| Common stock issued upon exercise of options andwarrants                             |  |         | 196,102   |   |  |                     | 196     |                                  |  |          | 733,660    |                |  |   | —     |    |  |   | —  |    |  |   | 733,856    |    |
| Tax benefits from stock option plans                                                 |  |         |      |   |  |                     | — |                                  |  |          | 415,000    |                |  |   | —     |    |  |   | —  |    |  |   | 415,000    |    |
| Balance at December 31,2003                                                          |  |         | 5,301,770 |   |  |                     | 5,302   |                                  |  |          | 21,713,447 |                |  |   | (1,885,946  | )  |  |   | —  |    |  |   | 19,832,803 |    |
| Netincome                                                                            |  |         | —   |   |  |                     | — |                                  |  |          | —    |                |  |   | 5,076,031   |    |  |   | —  |    |  |   | 5,076,031  |    |
| Common stock issued upon exercise of options andwarrants                             |  |         | 138,120   |   |  |                     | 138     |                                  |  |          | 371,319    |                |  |   | —     |    |  |   | —  |    |  |   | 371,457    |    |
| Treasurystock                                                                        |  |         | —   |   |  |                     | — |                                  |  |          | —    |                |  |   | —     |    |  | $      | (320,856 | )  |  |   | (320,856   | )  |
| Common stock issued as employeecompensation                                          |  |         | 3,525     |   |  |                     | 3       |                                  |  |          | 35,950     |                |  |   | —     |    |  |   | —  |    |  |   | 35,953     |    |
| Tax benefits from stock optionplans                                                  |  |         | —   |   |  |                     | — |                                  |  |          | 421,000    |                |  |   | —     |    |  |   | —  |    |  |   | 421,000    |    |
| Balance at December 31, 2004                                                         |  |         | 5,443,415 |   |  | $                        | 5,443   |                                  |  | $             | 22,541,716 |                |  | $      | 3,190,085   |    |  | $      | (320,856 | )  |  | $      | 25,416,388 |    |
|                                                                                      |

SeeNotes to Financial Statements

F-6

----

CPI AEROSTRUCTURES, INC.

STATEMENTS OF CASH FLOWS

|                                                                                                                       |  |        |            |         |  |        |            |         |  |  |
|-----------------------------------------------------------------------------------------------------------------------|--|--------|------------|---------|--|--------|------------|---------|--|--|
| Yearended December 31,                                                                                                |  | 2004   |            | 2003    |
| Cashflows from operatingactivities:                                                                                   |  |   |       |    |  |   |       |    |
| Net incomebefore operations of discontinued segment                                                                   |  | $      | 5,076,031  |    |  | $      | 7,932,043  |    |
| Adjustments to reconcile netincome before operations of discontinued segment to net cash used inoperating activities: |  |
| Depreciation andamortization                                                                                          |  |   | 184,355    |    |  |   | 131,204    |    |
| Warrants issued for consultingfees                                                                                    |  |   | —    |    |  |   | 105,354    |    |
| Commonstock issued for bank fees and employeecompensation                                                             |  |   | 35,953     |    |  |   | 88,689     |    |
| Gain on early extinguishment ofdebt                                                                                   |  |   | —    |    |  |   | (2,431,233 | )  |
| Deferred portion of provision/(benefit) for incometaxes                                                               |  |   | 1,202,000  |    |  |   | (407,000   | )  |
| Tax benefit for stockoptions                                                                                          |  |   | 421,000    |    |  |   | 415,000    |    |
| Changes in operating assets and liabilities:                                                                          |  |
| Decrease in accountsreceivable                                                                                        |  |   | 106,822    |    |  |   | 583,951    |    |
| Increase in costs and estimated earnings in excess ofbillings on uncompletedcontracts                                 |  |   | (8,580,620 | )  |  |   | (6,067,781 | )  |
| Decrease in prepaid expenses and other currentassets                                                                  |  |   | 167,326    |    |  |   | 116,169    |    |
| Increase in other assets                                                                                              |  |   | (87,278    | )  |  |   | —    |    |
| Increase(decrease) in accounts payable and accruedexpenses                                                            |  |   | 971,643    |    |  |   | (1,317,185 | )  |
| Increase (decrease) in incometaxes payable                                                                            |  |   | (58,000    | )  |  |   | 187,000    |    |
| **Net cash used in operatingactivities**                                                                              |  |   | (560,768   | )  |  |   | (663,789   | )  |
| Cash flows from investing activity-Purchase of property, plant andequipment                                           |  |   | (667,684   | )  |  |   | (268,790   | )  |
| **Net cash used in investingactivity**                                                                                |  |   | (667,684   | )  |  |   | (268,790   | )  |
| Cash flows from financing activities:                                                                                 |  |
| Proceeds from exercise of stockoptions                                                                                |  |   | 50,601     |    |  |   | 733,856    |    |
| Proceeds from long-termdebt                                                                                           |  |   | 170,000    |    |  |   | —    |    |
| Paymentof long-term debt                                                                                              |  |   | (30,109    | )  |  |   | (5,599,505 | )  |
| Proceeds from publicoffering                                                                                          |  |   | —    |    |  |   | 7,759,090  |    |
| **Net cash provided by financingactivities**                                                                          |  |   | 190,492    |    |  |   | 2,893,441  |    |
| Net cash provided by (used in) continuingoperations                                                                   |  |   | (1,037,960 | )  |  |   | 1,960,862  |    |
| Net cash provided by discontinuedoperations                                                                           |  |   | —    |    |  |   | 741,911    |    |
| Netincrease (decrease) incash                                                                                         |  |   | (1,037,960 | )  |  |   | 2,702,773  |    |
| Cash at beginning ofyear                                                                                              |  |   | 2,794,310  |    |  |   | 91,537     |    |
| Cash at end ofyear                                                                                                    |  | $      | 1,756,350  |    |  | $      | 2,794,310  |    |
| **Supplemental schedule of noncashinvesting and financing activity:**                                                 |  |
| Property, plant and equipment acquired through capitallease                                                           |  | $      | 38,915     |    |  |   | —    |    |
| Stockoptions proceeds paid through Company'sstock                                                                     |  | $      | 320,856    |    |  |   | —    |    |
| **Supplemental schedule of cash flowinformation:**                                                                    |  |
| Cashpaid during the year for interest                                                                                 |  | $      | 8,109      |    |  | $      | 148,006    |    |
| **Cash paid forincometaxes:**                                                                                         |  | $      | 199,500    |    |  |   | —    |    |
|                                                                                                                       |

SeeNotes to Financial Statements

F-7

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |                                                                               |  |                                                                                                                                                                                                                                                                                                                                                               |  |  |  |  |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-------------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **1.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | **PRINCIPALBUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES:** |  | CPI Aerostructures, Inc.'s("CPI" or the"Company") operations consist of the designand production of complex aerospace structural subassemblies under U.S.government and commercial contracts. The length of the Company'scontracts varies but is typically between one and two years for U.S.government contracts and up to 10 years for commercialcontracts. |
| CPI's revenue is recognized basedon the percentage of completion method of accounting for its contractsmeasured by the percentage of total costs incurred to date to estimatedtotal costs at completion for each contract. Contract costs include alldirect material, labor costs, tooling and those indirect costs relatedto contract performance, such as indirect labor, supplies, tools,repairs and depreciation costs. Selling, general and administrativecosts are charged to expense as incurred. Estimated losses onuncompleted contracts are recognized in the period in which such lossesare determined. Changes in job performance may result in revisions tocosts and income and are recognized in the period in which revisionsare determined to be required. The percentage of completion method ofaccounting involves considerable use of estimates in determiningrevenues, costs and profits and in assigning the amounts to accountingperiods and, as a result, there can be a significant disparity betweenearnings (both for accounting and taxes) as reported and actual cashreceived by us during any reporting period. In accordance with industrypractice, costs and estimated earnings in excess of billings onuncompleted contracts, included in the accompanying balance sheet,contain amounts relating to contracts and programs with long productioncycles, a portion of which will not be realized within one year.CPI's recorded revenue may be adjusted in later periods in theevent that CPI's cost estimates prove to be inaccurate or acontract is terminated. |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                          |  | TheCompany maintains cash in bank deposit accounts which, at times, mayexceed federally insured limits. The Company has not experienced anylosses in such accounts. The Company believes it is not exposed to anysignificant credit risk oncash.                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                          |  | Accounts receivable arereported at their outstanding unpaid principal balances. The Companywrites off accounts when they are deemed to be uncollectible. TheCompany has experienced insignificant amounts of bad debts in suchaccounts.                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                          |  | Depreciation andamortization of property, plant and equipment is provided by thestraight-line method over the estimated useful lives of the respectiveassets or the life of the lease, for leaseholdimprovements.                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                          |  | The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires the use of estimatesby management. Actual results could differ from theseestimates.                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

F-8

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|        |  |        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |  |  |
|--------|--|--------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
|   |  |   |  | TheCompany reviews its long-lived assets and certain related intangiblesfor impairment whenever changes in circumstances indicate that thecarrying amount of an asset may not be fully recoverable. As a resultof its review, the Company does not believe that any such change hasoccurred. If such changes in circumstance are present, a loss isrecognized to the extent the carrying value of the asset is in excessof the sum of the undiscounted cash flows expected to result from theuse of the asset and amounts expected to be realized upon its eventualdisposition.                                                                                                                                                                                                   |
|   |  |   |  | The fair value of theCompany's short-term debt is estimated based on the current ratesoffered to the Company for debt of similar terms and maturities. Usingthis method, the fair value of the Company's short-term debt wasnot significantly different than the stated value at December 31,2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |  |   |  | The Company incurred freightand delivery costs of approximately $178,000 and $176,000,respectively, during the years ended December 31, 2004 and 2003. Thesecosts are included in cost ofsales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |  |   |  | Basic earnings per commonshare is computed using the weighted-average number of sharesoutstanding. Diluted earnings per common share is computed using theweighted-average number of shares outstanding adjusted for theincremental shares attributed to outstanding options and warrants topurchase common stock. Incremental shares of 727,479 and 510,011 wereused in the calculation of diluted earnings per common share in 2004and 2003, respectively. Incremental shares of 75,000 were not includedin the diluted earnings per share calculations at December 31, 2004 astheir exercise price was in excess of the Company's stock priceat December 31, 2004 and, accordingly, these shares are not assumed tobe exercised for the diluted earnings per sharecalculation. |
|   |  |   |  | The Company haselected to apply Accounting Principles Board("APB") Opinion No. 25, Accounting for StockIssued to Employees, and related interpretations in accounting for itsstock options issued to employees (intrinsic value) and has adopted thedisclosure-only provisions of Statement of Financial AccountingStandards ("SFAS") No. 123, Accounting forStock-Based Compensation. Had the Company elected to recognizecompensation cost based on the fair value of the options granted at thegrant date as prescribed by SFAS No. 123, the Company's netincome and income per common share would have been asfollows:                                                                                                                                                        |
|        |

F-9

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|                                                                                                                                                                 |  |        |           |        |  |        |           |        |  |  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|-----------|--------|--|--------|-----------|--------|--|--|
| Year ended December31,                                                                                                                                          |  | 2004   |           | 2003   |
| Net income – asreported                                                                                                                                   |  | $      | 5,076,031 |   |  | $      | 8,393,278 |   |
| Deduct:    Totalstock-based employee compensation expense determined under fair valuebased method for all awards, net of related taxeffects |  |   | 476,865   |   |  |   | 453,866   |   |
| Net income – proforma                                                                                                                                     |  | $      | 4,599,166 |   |  | $      | 7,939,412 |   |
| Basic income per share – asreported                                                                                                                       |  | $      | 0.94      |   |  | $      | 1.72      |   |
| Basic income per share – proforma                                                                                                                         |  | $      | 0.85      |   |  | $      | 1.63      |   |
| Diluted income per share – asreported                                                                                                                     |  | $      | 0.83      |   |  | $      | 1.56      |   |
| Diluted income per share – proforma                                                                                                                       |  | $      | 0.75      |   |  | $      | 1.48      |   |
|                                                                                                                                                                 |

|  | TheCompany's assumptions used to calculate the fair values ofoptions issued during 2004 were (i) risk-free interest rates of2.74% and 4.00%, (ii) expected life of 10 years, (iii)expected volatility of 35%, and (iv) expected dividends of zero.In 2003, the Company's assumptions used to calculate the fairvalues of options issued were (i) risk-free interest rates of2.10% and 2.78%, (ii) expected life of 10 years, (iii)expected volatility of 198%, and (iv) expected dividends ofzero. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | In December 2004, the FASB issued SFAS No. 123(R)(revised 2004), "Share-Based Payment", whichamends FASB Statement No. 123 and will be effective for publiccompanies for interim or annual periods beginning after June 15, 2005.The new standard will require us to expense employee stock options andother share-based payments. The FASB believes the use of a binomiallattice model for option valuation is capable of more fully reflectingcertain characteristics of employee share options compared to theBlack-Scholes options pricing model.  The new standard may beadopted in one of three ways — the modified prospectivetransition method, a variation of the modified prospective transitionmethod or the modified retrospective transition method. We arecurrently evaluating how we will adopt the standard and evaluating theeffect that the adoption of SFAS 123(R) will have on our financialposition and results of operations. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | In November2004, the FASB issued SFAS No.  151, Inventory Costs, anamendment of ARB No.  43, Chapter  4. This statementamends the guidance in ARB No.  43, Chapter  4,Inventory Pricing, to clarify the accounting for abnormalamounts of idle facility expense, freight, handling costs, and wastedmaterial (spoilage). Paragraph  5 of ARB No.  43,Chapter  4, previously stated that". . . under some circumstances,items such as idle facility expense, excessive spoilage, doublefreight, and rehandling costs may be so abnormal as to requiretreatment as current periodcharges . . ." SFAS No. 151 requiresthat those items be recognized as current-period charges regardless ofwhether they meet the criterion of "soabnormal." In addition, this statement requires thatallocation of fixed production overheads to the costs of conversion bebased on the normal capacity of the production facilities. Theprovisions of SFAS 151 shall be applied prospectively and are effectivefor inventory costs incurred during fiscal years beginning after |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

F-10

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|  | June  15, 2005, with earlierapplication permitted for inventory costs incurred during fiscal yearsbeginning after the date this Statement was issued. The adoption ofSFAS No.  151 is not expected to have a material impact on ourfinancial position and results of operations. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | InDecember  2004, the FASB issued SFAS No.  153, Exchangesof Nonmonetary Assets, an amendment of APB Opinion No.  29.The guidance in APB Opinion No.  29, Accounting forNonmonetary Transactions, is based on the principle that exchangesof nonmonetary assets should be measured based on the fair value ofassets exchanged. The guidance in that Opinion, however, includedcertain exceptions to that principle. This Statement amends Opinion 29to eliminate the exception for nonmonetary exchanges of similarproductive assets that do not have commercial substance. A nonmonetaryexchange has commercial substance if the future cash flows of theentity are expected to change significantly as a result of theexchange. SFAS No.  153 is effective for nonmonetary exchangesoccurring in fiscal periods beginning after June  15, 2005. Theadoption of SFAS No.  153 is not expected to have a materialimpact on our financial position and results of operations. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        |  |                                                                                 |  |                                                                                                                       |  |  |  |  |  |  |
|--------|--|---------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **2.** |  | **COSTS AND ESTIMATED EARNINGS IN EXCESS OFBILLINGS ON UNCOMPLETED CONTRACTS:** |  | At December 31, 2004,costs and estimated earnings in excess of billings on uncompletedcontracts (unbilled) consistof: |
|        |

|                                                                               |  |                |            |            |  |        |            |        |  |        |            |        |  |  |
|-------------------------------------------------------------------------------|--|----------------|------------|------------|--|--------|------------|--------|--|--------|------------|--------|--|--|
|                                                                          |  | U.S.Government |            | Commercial |  | Total  |
| Costsincurred on uncompletedcontracts                                         |  | $              | 32,764,584 |       |  | $      | 13,373,694 |   |  | $      | 46,138,278 |   |
| Estimatedearnings                                                             |  |           | 20,351,259 |       |  |   | 6,187,927  |   |  |   | 26,539,186 |   |
|                                                                          |  |           | 53,115,843 |       |  |   | 19,561,621 |   |  |   | 72,677,464 |   |
| Less billings todate                                                          |  |           | 28,746,944 |       |  |   | 17,900,013 |   |  |   | 46,646,957 |   |
| **Costs and estimated earnings inexcess of billings on uncompletedcontracts** |  | $              | 24,368,899 |       |  | $      | 1,661,608  |   |  | $      | 26,030,507 |   |
|                                                                               |

|  | Unbilledcosts and estimated earnings are billed in accordance with applicablecontract terms. As of December 31, 2004, $ 1,243,000 of the balancesabove, primarily commercial contracts, are not expected to be collectedwithin one year. Amounts not paid or billed under retainage provisionsare not material. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

F-11

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|        |  |                          |  |                                                                                   |  |  |  |  |  |  |
|--------|--|--------------------------|--|-----------------------------------------------------------------------------------|--|--|--|--|--|--|
| **3.** |  | **ACCOUNTS RECEIVABLE:** |  | AtDecember 31, 2004, accounts receivable consists of trade receivables asfollows: |
|        |

|                                            |  |            |  |  |  |  |
|--------------------------------------------|--|------------|--|--|--|--|
| Billedreceivables                          |  | $1,540,504 |
| Unbilled receivables on completedcontracts |  | 100,498    |
|                                       |  | $1,641,002 |
|                                            |

|        |  |                                    |  |                                                                   |  |  |  |  |  |  |
|--------|--|------------------------------------|--|-------------------------------------------------------------------|--|--|--|--|--|--|
| **4.** |  | **PROPERTY, PLANT AND EQUIPMENT:** |  | Property, plant and equipment, at cost, consists of thefollowing: |
|        |

|                                               |  |                                  |  |                       |  |  |  |  |  |  |
|-----------------------------------------------|--|----------------------------------|--|-----------------------|--|--|--|--|--|--|
| December 31, 2004                             |  |                             |  | Estimated Useful Life |
| Machineryandequipment                         |  | $    522,095 |  | 5to 10 years          |
| Computerequipment                             |  | 547,975                          |  | 5 years               |
| Furnitureand fixtures                         |  | 124,615                          |  | 7 years               |
| Automobiles and trucks                        |  | 23,488                           |  | 5years                |
| Leaseholdimprovements                         |  | 483,213                          |  | 10 years              |
|                                          |  | **1,701,386**                    |  |
| Less accumulated depreciation andamortization |  | 818,628                          |  |                  |
|                                          |  | $    882,758 |  |                  |
|                                               |

|  | Depreciationand amortization expense for the years ended December 31, 2004 and 2003was $184,355 and $131,204, respectively. |
|--|-----------------------------------------------------------------------------------------------------------------------------|

|        |  |                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |  |  |
|--------|--|--------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **5.** |  | **RELATEDPARTY TRANSACTIONS:** |  | In October 2000, the Company adopted aGreit Plan for the purpose of offering senior management a deferredcompensation death benefit plan (the "Plan")that provides a tax-free benefit and which is tax-neutral to theCompany. Pursuant to the Plan, the Company made a noninterest-bearingloan to an employee in the amount of $150,000, which was used topurchase the Plan. The Plan has since been terminated. The surrendervalue has been returned to the employee who has placed the proceedsfrom the surrender value in an annuity, which will mature to $150,000.Simultaneously, the employee purchased an insurance policy in theamount of $150,000, of which the Company is the sole beneficiary. Theloan to the employee will be repaid to the Company upon the maturitydate of the annuity or upon the death of the employee, whichever occursfirst. |
|        |

F-12

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|        |  |                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  |  |  |  |
|--------|--|----------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **6.** |  | **DISCONTINUEDOPERATIONS:**            |  | On January 22, 2002, the Company announced adecision made by the board of directors as of December 31, 2001 toclose the Kolar facilities located in Ithaca, New York, and liquidateits assets through a public auction of its machinery and equipment andthe private sale of its real estate. On February 21, 2002, Kolar sold asubstantial portion of its machinery and equipment at an auctionconducted by Daley-Hodkin Corporation at Kolar's main facility inIthaca, New York. In connection with the discontinuance ofKolar's operations, the Company incurred a one-time charge of$10,422,816 related to the write-off of Kolar's assets, net ofexpected proceeds, and an accrual for estimated losses during thephase-out period. The disposition of Kolar's operationsrepresents a disposal of a business segment under APB Opinion No. 30 in2001. Accordingly, results of the operation have been classified asdiscontinued. On July 2, 2003, Kolar's corporate entity wasmerged into the Company. For business segment reporting purposes,Kolar's business results were previously classified as the"Machining" segment. In 2003, the Companysold the remaining assets for Kolar and recorded a gain of$461,235. |
| **7.** |  | **LONG TERM DEBT ANDCREDIT FACILITY:** |  | Long term debt includes capital leaseswhich expire during 2007. The leases require monthly payments ofprincipal and interest, imputed at an interest rate of 5% and9% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        |

|  | Future minimum leasepayments under long-term debt are as follows: |
|--|-------------------------------------------------------------------|

|                                            |  |                     |  |  |  |  |
|--------------------------------------------|--|---------------------|--|--|--|--|
| Year ending December 31                    |  |
| 2005                                       |  | $  83,144 |
| 2006                                       |  |   82,427  |
| 2007                                       |  |   46,849  |
|                                       |  | 212,420             |
| Less currentmaturities                     |  |   83,144  |
| **Long-term debt, less currentmaturities** |  | $129,276            |
|                                            |

|  | On January28, 2003, the Company sold one of the two remaining Kolar buildings andrelated land for $585,000 and on May 7, 2003, the final building andrelated land was sold for $190,000. The proceeds were used to repaybank loans. |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | On February 19, 2003, the Company consummateda public offering of 2,300,000 common shares at a price of $4.00 pershare, raising gross and net proceeds of $9,200,000 and $7,759,000,respectively. Approximately $2,433,000 of the net proceeds were used torepay bank loans, $2,700,000 was used to repay the Note Payable –Seller, which had a carrying value plus accrued interest ofapproximately $5,131,000. Accordingly, the Company recorded a gain ofapproximately $2,431,000 on the extinguishment of the debt. Theremaining net proceeds of approximately $2,631,000 are have been usedto fund continuing operations. |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | In September 2003, theCompany entered into a three year, $5.0 million revolving creditfacility with JP Morgan Chase Bank, secured by the assets |
|--|-------------------------------------------------------------------------------------------------------------------------------------------------|

F-13

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|  | of the Company. The facility specifiesinterest rates that range between the Prime Rate and 225 basis pointsover LIBOR, depending on certain terms and conditions. As of December31, 2004, the Company has not borrowed any funds pursuant to thisfacility. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|        |  |                  |  |                                                                                                                              |  |  |  |  |  |  |
|--------|--|------------------|--|------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **8.** |  | **COMMITMENTS:** |  | The Company hasemployment agreements with six employees. The aggregate futurecommitment under these agreements is asfollows: |
|        |

|                          |  |                            |  |  |  |  |
|--------------------------|--|----------------------------|--|--|--|--|
| Year ending December 31, |  |
| 2005                     |  | $   860,646 |
| 2006                     |  |    820,870  |
| 2007                     |  |    433,150  |
|                     |  | $2,114,666                 |
|                          |

|  | Theseagreements provide for additional bonus payments that are calculated asdefined. |
|--|--------------------------------------------------------------------------------------|

|  | The Company leases an office and warehousefacility under a non-cancelable operating lease which expires inDecember 2014. The aggregate future commitment under this agreement isas follows: |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |  |                            |  |  |  |  |
|--------------------------|--|----------------------------|--|--|--|--|
| Year ending December 31, |  |
| 2005                     |  | $   375,000 |
| 2006                     |  |    386,250  |
| 2007                     |  |    397,838  |
| 2008                     |  |    409,773  |
| 2009                     |  |    422,066  |
| Thereafter               |  |   2,308,029      |
|                     |  | $4,298,956                 |
|                          |

|                                              |                                                          |
|----------------------------------------------|----------------------------------------------------------|
| 9.    INCOMETAXES:  | The provision for income taxes consistsof the following: |

|                         |  |                                      |  |                                                  |  |  |  |  |  |  |
|-------------------------|--|--------------------------------------|--|--------------------------------------------------|--|--|--|--|--|--|
| Years ended December31, |  | 2004                                 |  | 2003                                             |
| Current:                |  |
| Federal                 |  | $   572,000           |  | $   593,000                       |
| State andlocal          |  |      20,000 |  | $       9,000 |
| Deferred:               |  |
| Federal                 |  |   1,202,000                |  | (407,000)                                        |
|                    |  | $1,794,000                           |  | $   195,000                       |
|                         |

F-14

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|  | The difference between the incometax provision computed at the federal statutory rate and the actual taxprovision is accounted for as follows: |
|--|------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |  |                                         |  |                                        |  |  |  |  |  |  |
|-----------------------------------------------|--|-----------------------------------------|--|----------------------------------------|--|--|--|--|--|--|
| December31,                                   |  | 2004                                    |  | 2003                                   |
| Taxes computed at thefederal statutoryrate    |  | $2,336,000                              |  | $  2,920,000                 |
| Utilization of net operating losscarryforward |  |      (542,000) |  |   (2,725,000)                |
|                                          |  | $1,794,000                              |  | $     195,000 |
|                                               |

|  | Thecomponents of deferred income tax liabilities at December 31, 2004 areas follows: |
|--|--------------------------------------------------------------------------------------|

|                                       |  |        |          |         |  |  |
|---------------------------------------|--|--------|----------|---------|--|--|
|                                  |  |   |
| State netoperating loss carryforwards |  | $      | 204,000  |    |
| Temporary differences                 |  |   | (348,000 | )  |
|                                  |  | $      | (144,000 | )  |
|                                       |

|  | Asof December 31, 2004, the Company had net operating loss carryforwardsof approximately $4,647,000 for state income tax purposes expiringthrough 2022. |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | During 2004, the Company reversedapproximately $850,000 of valuation allowance, which was reducing thedeferred tax asset related to the Company's net operating losscarryforwards to an amount that the Company deemed more likely than notto be realized. The Company has no valuation allowance at December 31,2004. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | The Company recognized, for income tax purposes, atax benefit of $421,000 and $415,000, for the years ended December 31,2004 and 2003, respectively, for compensation expense related to itsstock option plan for which no corresponding charge to operations hasbeen recorded. Such amounts have been added to additional paid-incapital in those years. |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         |  |                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  |  |  |  |  |
|---------|--|----------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **10.** |  | **EMPLOYEE STOCK OPTION PLANS:** |  | In April 1992, the Company adopted the 1992 Stock Option Plan (the"1992 Plan"). The 1992 Plan, for which 83,334common shares are reserved for issuance, provides for the issuance ofeither incentive stock options or nonqualified stock options toemployees, consultants or others who provide services to the Company.The options may not be exercised more than five years from the date ofissuance. No more options may be granted under the 1992plan. |
|         |

|  | In 1995, the Company adopted the 1995Stock Option Plan (the "1995 Plan"), asamended, for which 200,000 common shares are reserved for issuance. The1995 Plan provides for the issuance of either incentive stock optionsor nonqualified stock options to employees, consultants or others whoprovide services to the Company. The options' exercise price isequal to the closing price of the Company's shares on the day ofissuance, except for incentive stock options granted to theCompany's president, which are exercisable at 110% of theclosing price of the Company's shares on the date ofissuance. |
|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

F-15

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|  | In 1998, the Company adopted the1998 Stock Option Plan (the "1998 Plan"). The1998 Plan, as amended, reserved 463,334 common shares for issuance. The1998 Plan provides for the issuance of either incentive stock optionsor nonqualified stock options to employees, consultants or others whoprovide services to the Company. The options' exercise price isequal to the closing price of the Company's shares on the day ofissuance, except for incentive stock options granted to theCompany's president, which are exercisable at 110% of theclosing price of the Company's shares on the date ofissuance. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | In 2000, the Company adopted the 2000 StockOption Plan (the "2000 Plan"). The 2000 Plan,as amended, reserved 830,000 common shares for issuance. The 2000 Planprovides for the issuance of either incentive stock options ornonqualified stock options to employees, consultants or others whoprovide services to the Company. The options' exercise price isequal to the closing price of the Company's shares on the day ofissuance, except for incentive stock options granted to theCompany's president, which are exercisable at 110% of theclosing price of the Company's shares on the date ofissuance. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | The Company has 23,810 options available forgrant under the 1995 Plan, 10,666 options available for grant under the1998 Plan, and 50,000 options available for grant under the 2000Plan. |
|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | A summary of the status of the Company's fourstock option plans as of December 31, 2004 and 2003 and changes duringthose years is as follows: |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------|

|                                                 |  |         |           |                                |  |                               |  |                                |           |         |  |                   |  |  |  |  |  |  |
|-------------------------------------------------|--|---------|-----------|--------------------------------|--|-------------------------------|--|--------------------------------|-----------|---------|--|-------------------|--|--|--|--|--|--|
|                                            |  | 2004    |           | 2003                           |
| Fixed Options                                   |  | Options |           | Weighted-averageExercise Price |  | Options                       |  | Weighted-average ExercisePrice |
| Outstanding and exercisable at beginning ofyear |  |    | 1,114,752 |                           |  | $  3.84             |  |                           | 1,197,338 |    |  | $  3.49 |
| Granted during year                             |  |    | 130,000   |                           |  |   10.44             |  |                           | 150,000   |    |  |   7.46  |
| Exercised/forfeited                             |  |    | (170,000  | )                         |  |     4.54  |  |                           | (232,586  | )  |  |   5.18  |
| Outstanding and exercisable at end ofyear       |  |    | 1,074,752 |                           |  |     4.53  |  |                           | 1,114,752 |    |  | $  3.84 |
| Weighted-average fair value of optionsgranted   |  |    |      |                           |  | $    5.66 |  |                           |      |    |  | $  6.22 |
|                                                 |

F-16

----

CPIAEROSTRUCTURES, INC.     NOTES TO FINANCIALSTATEMENTSDecember 31, 2004

|  | The following table summarizesinformation about stock options outstanding and exercisable at December31, 2004: |
|--|----------------------------------------------------------------------------------------------------------------|

|                         |  |                                    |           |                                             |  |                                 |  |                              |  |  |  |  |  |  |
|-------------------------|--|------------------------------------|-----------|---------------------------------------------|--|---------------------------------|--|------------------------------|--|--|--|--|--|--|
| Range of Exercise Price |  | Number Outstanding and Exercisable |           | Weighted-average Remaining Contractual Life |  | Weighted-average Exercise Price |
| $1.20-$1.65             |  |                               | 205,000   |                                        |  | 6.60years                       |  |     1.21 |
| $2.53-$2.59             |  |                               | 393,000   |                                        |  | 5.35 years                      |  |     2.58 |
| $6.27-$6.97             |  |                               | 333,002   |                                        |  | 7.00years                       |  |     6.45 |
| $7.19-$11.31            |  |                               | 143,750   |                                        |  | 7.41 years                      |  |   10.13            |
| $1.20-$11.31            |  |                               | 1,074,752 |                                        |  | 6.39years                       |  | $  4.53            |
|                         |

|         |  |                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |  |  |
|---------|--|----------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| **11.** |  | **WARRANTSAND OPTIONS:**   |  | In February 2002, the Company issued 5,000options to a consultant as compensation related to a one-yearconsulting agreement. The options are exercisable at $1.65 per sharethrough February 2007. The options are valued at $113,183, of which$105,354 has been charged to operations in 2003, based on theCompany's assumptions as follows: (i) risk-free interest rate of5.12%, (ii) expected life of five years, (iii) expectedvolatility of 84.95%, and (iv) expected dividends of zero. Thewarrants are accounted for in accordance with EITF 96-18, Accountingfor Equity Interests that are Issued to Other Than Employees, or inConjunction with Selling, Goods orServices.                                                             |
|    |  |                       |  | In February 2003,the Company issued to an underwriter (and its designees) warrants topurchase an aggregate of 200,000 shares of the Company's commonstock as compensation related to the Company's public offering.The warrants are exercisable, in whole or in part, at $4.40 per sharefrom February 2004 through February 2008. At December 31, 2004,warrants to purchase 195,000 shares remain outstanding.                                                                                                                                                                                                                                                                                                                                 |
| **12.** |  | **EMPLOYEE BENEFIT PLAN:** |  | OnSeptember 11, 1996, CPI's board of directors instituted a definedcontribution plan under Section 401(k) of the Internal Revenue Code(the "Code"). On October 1, 1998, the Companyamended and standardized both the CPI and Kolar plans as required bythe Code. Pursuant to the amended plan, qualified employees maycontribute a percentage of their pretax eligible compensation to thePlan and the Company will match a percentage of each employee'scontribution. Additionally, the Company has a profit-sharing plancovering all eligible employees. Contributions by the Company are atthe discretion of management. The amount of contributions recorded bythe Company in 2004 and 2003 amounted to $108,706 and $81,310,respectively. |
| **13.** |  | **MAJORCUSTOMER:**         |  | 99% of the sales in 2004 and 98% ofthe sales in 2003 were to the U.S. government.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **14.** |  | **PUBLIC OFFERING:**       |  | On February19, 2003, the Company consummated a public offering of 2,300,000 commonshares at a price of $4.00 per share raising proceeds of $7,700,000,net of offeringexpenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|         |

F-17

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Inaccordance with Section 13 or 15(d) of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned,thereunto dulyauthorized.

|                      |  |                                                                        |  |        |                   |        |  |  |  |  |
|----------------------|--|------------------------------------------------------------------------|--|--------|-------------------|--------|--|--|--|--|
|                 |  | CPIAEROSTRUCTURES,INC.                                                 |
|                 |  | (Registrant)                                                           |
|                 |  |                                                                   |  |   |              |   |
|                 |  |                                                                   |  |   |              |   |
| Dated:March 30, 2005 |  | By:                                                                    |  |   | /s/ Edward J.Fred |   |
|                 |  | Edward J. FredChiefExecutive Officer, President, Secretary andDirector |
|                      |

In accordance with the Exchange Act, thisreport has been signed below by the following persons on behalf of theregistrant and in the capacities and on the datesindicated:

|                      |  |                                                           |  |                |
|----------------------|--|-----------------------------------------------------------|--|----------------|
| Signature            |  | Title                                                     |  | Date           |
|                      |
| /s/Eric Rosenfeld    |  | Chairmanof the Board of Directors                         |  | March 30,2005  |
|                      |
| Eric Rosenfeld       |
|                      |
| /s/ Edward J. Fred   |  | Chief Executive Officer, President, Secretaryand Director |  | March 30, 2005 |
|                      |
| EdwardJ. Fred        |
|                      |
| /s/Arthur August     |  | ChairmanEmeritus                                          |  | March 30, 2005 |
|                      |
| Arthur August        |
|                      |
| /s/Vincent Palazzolo |  | Chief Financial Officer                                   |  | March30, 2005  |
|                      |
| VincentPalazzolo     |
|                      |
| /s/ WalterPaulick    |  | Director                                                  |  | March 30,2005  |
|                      |
| WalterPaulick        |
|                      |
| /s/ KennethMcSweeney |  | Director                                                  |  | March 30,2005  |
|                      |
| KennethMcSweeney     |
|                      |
| /s/ A.C. Providenti  |  | Director                                                  |  | March 30,2005  |
|                      |
| A.C.Providenti       |
|                      |

----