UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________

Commission File Number: 1-11398

CPI AEROSTRUCTURES, INC.

(Exact name of registrant as specified in its charter)

New York		11-2520310
(State or other jurisdiction		(IRS Employer Identification Number)
of incorporation or organization)

91 Heartland Blvd., Edgewood, NY		11717
(Address of principal executive offices)		(Zip code)

(631) 586-5200

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	CVU	NYSE American

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 10, 2026, the registrant had 13,249,734 shares of common stock, $.001 par value, outstanding

INDEX

Part I - Financial Information		1

Item 1 – Consolidated Financial Statements (Unaudited)		1

Condensed Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025		1

Condensed Consolidated Statements of Operations for the Three and Six months ended June 30, 2026 and 2025 (Unaudited)		2

Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six months ended June 30, 2026 and 2025 (Unaudited)		3

Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2026 and 2025 (Unaudited)		4

Notes to Condensed Consolidated Financial Statements (Unaudited)		5

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		14

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		20

Item 4 – Controls and Procedures		20

Part II - Other Information		21

Item 1 – Legal Proceedings		21

Item 1A – Risk Factors		21

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		21

Item 3 – Defaults Upon Senior Securities		21

Item 4 – Mine Safety Disclosures		21

Item 5 – Other Information		21

Item 6 – Exhibits		21

Signatures		22

Part I - Financial Information

Item 1 - Consolidated Financial Statements (Unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2026 (Unaudited)			December 31, 2025
ASSETS
Current Assets:
Cash	$	835,875		$	899,199
Accounts receivable, net		9,839,740			5,764,928
Contract assets		34,278,512			33,670,354
Inventory		620,268			800,823
Prepaid expenses and other current assets		2,103,024			2,272,696
Total Current Assets		47,677,419			43,408,000

Operating lease right-of-use assets		8,777,416			9,515,207
Property and equipment, net		512,562			412,553
Deferred tax asset, net		19,472,988			19,894,796
Goodwill		1,784,254			1,784,254
Other assets		486,377			229,691
Total Assets	$	78,711,016		$	75,244,501

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	16,035,856		$	14,724,293
Accrued expenses		3,041,457			4,763,719
Contract liabilities		2,970,578			1,628,382
Loss reserve		126,676			138,426
Current portion of long-term debt		250,000			187,500
Financing lease liabilities, current		18,613			—
Operating lease liabilities, current		1,515,379			1,434,385
Income taxes payable		230,311			142,540
Total Current Liabilities		24,188,870			23,019,245

Line of credit		9,173,672			8,373,672
Long-term financing lease liabilities		86,993			—
Long-term operating lease liabilities		7,572,027			8,353,120
Long-term debt, net of current portion		9,578,051			9,690,890
Total Liabilities		50,599,613			49,436,927

Commitments and Contingencies (see note 11)					—

Shareholders’ Equity:
Preferred stock- $.001 par value; authorized 5,000,000 shares, 0 shares issued and outstanding		—			—
Common stock - $.001 par value; authorized 50,000,000 shares, 13,227,806 and 13,155,061 shares, respectively, issued and outstanding		13,228			13,155
Additional paid-in capital		75,523,591			75,142,168
Accumulated deficit		(47,425,416	)		(49,347,749	)
Total Shareholders’ Equity		28,111,403			25,807,574
Total Liabilities and Shareholders’ Equity	$	78,711,016		$	75,244,501

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2026		2025		2026		2025
Revenue	$	17,581,532	$	15,179,108	$	34,941,472	$	30,579,716
Cost of sales		13,709,795		14,515,726		26,589,844		28,266,859
Gross profit		3,871,737		663,382		8,351,628		2,312,857

Selling, general and administrative expenses		2,675,952		2,654,024		5,326,215		5,489,801
Income (loss) from operations		1,195,785		(1,990,642)		3,025,413		(3,176,944)

Other income		—		5,480		30,373		6,980
Interest expense		(312,939)		(287,546)		(604,874)		(775,637)
Income (loss) before provision for income taxes		882,846		(2,272,708)		2,450,912		(3,945,601)

Provision (benefit) for income taxes		197,231		(947,749)		528,579		(1,296,718)
Net income (loss)	$	685,615	$	(1,324,959)	$	1,922,333	$	(2,648,883)

Income per common share, basic	$	0.05	$	(0.10)	$	0.15	$	(0.21)
Income per common share, diluted	$	0.05	$	(0.10)	$	0.15	$	(0.21)

Shares used in computing income per common share:
Basic		12,908,141		12,748,869		12,885,785		12,728,209
Diluted		13,042,595		12,748,869		13,056,924		12,728,209

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

	Common Stock Shares			Common Stock Amount			Additional Paid-in Capital		Accumulated Deficit			Total Shareholders’ Equity
Balance at January 1, 2026		13,155,061		$	13,155		$	75,142,168	$	(49,347,749	)	$	25,807,574
Net income		—			—			—		1,236,718			1,236,718
Issuance of common stock upon settlement of restricted stock, net		34,000			34			—		—			34
Stock-based compensation expense		—			—			235,253		—			235,253
Balance at March 31, 2026		13,189,061		$	13,189		$	75,377,421	$	(48,111,031	)	$	27,279,579
Net income		—			—			—		685,615			685,615
Issuance of common stock upon settlement of restricted stock, net		38,745			39			—		—			39
Stock-based compensation expense		—			—			146,170		—			146,170
Balance at June 30, 2026		13,227,806		$	13,228		$	75,523,591	$	(47,425,416	)	$	28,111,403

Balance at January 1, 2025		12,978,741		$	12,979		$	74,424,651	$	(48,504,388	)	$	25,933,242
Net loss		—			—			—		(1,323,924	)		(1,323,924	)
Issuance of common stock upon settlement of restricted stock, net		30,553			30			—		—			30
Stock-based compensation expense		—			—			320,199		—			320,199
Balance at March 31, 2025		13,009,294		$	13,009		$	74,744,850	$	(49,828,312	)	$	24,929,547
Net loss		—			—			—		(1,324,959	)		(1,324,959	)
Issuance of common stock upon settlement of restricted stock, net		(31,035	)		(31	)		—		—			(31	)
Stock-based compensation expense		—			—			168,614		—			168,614
Balance at June 30, 2025		12,978,259		$	12,978		$	74,913,464	$	(51,153,271	)	$	23,773,171

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	For the Six Months ended June 30,
	2026		2025
Cash flows from operating activities:
Net income (loss)	$	1,922,333	$	(2,648,883)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		66,136		187,365
Amortization of debt issuance cost		24,322		10,661
Stock-based compensation		381,496		488,812
Deferred income taxes		421,808		(1,315,528)
Provision for credit losses		84,363		(86,814)
Amortization of lease right-of-use assets		737,791		826,431
Changes in operating assets and liabilities:
Increase in accounts receivable		(4,159,175)		(2,250,823)
(Increase) decrease in contract assets		(608,158)		1,805,268
Decrease (increase) in inventory		180,555		(106,884)
Decrease in prepaid expenses and other assets		169,673		93,450
(Decrease) increase in accounts payable and accrued expenses		(364,967)		1,057,552
Increase (decrease) in contract liabilities		1,342,196		(533,727)
Decrease in operating lease liabilities		(700,099)		(836,199)
(Decrease) increase in loss reserve		(11,750)		47,305
Increase (decrease) in income taxes payable		87,771		(55,861)
Net cash used in operating activities		(425,705)		(3,317,875	)

Cash flows from investing activities:
Purchase of property and equipment		(60,539)		(62,937	)
Net cash used in investing activities		(60,539)		(62,937	)

Cash flows from financing activities:
Principal payments on line of credit		—		(1,250,000	)
Principal payments on long-term debt		(62,500)		(15,661	)
Proceeds from line of credit		800,000		—
Repayments of insurance financing obligation		(191,359)		(170,009	)
Equity issuance costs		(123,221)		—
Net cash provided by (used in) financing activities		422,920		(1,435,670	)

Net decrease in cash		(63,324)		(4,816,482	)
Cash at beginning of period		899,199		5,490,963
Cash at end of period	$	835,875	$	674,481

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	479,659	$	864,820
Income Taxes	$	19,000	$	19,996

Non Cash item Investing and Financing Activities:
Increase to operating right-of-use asset and operating lease liability from lease amendment	$	—	$	8,190,636
Increase to financing right-of-use asset and operating lease liability	$	105,606	$	—
Deferred equity issuance costs incurred but not yet paid	$	145,627	$	—

See Notes to Condensed Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.	INTERIM FINANCIAL STATEMENTS

Basis of Presentation

The Company consists of CPI Aerostructures, Inc. (“CPI Aero”), Welding Metallurgy, Inc. (“WMI”), a wholly owned subsidiary of CPI Aero, and Compac Development Corporation (“Compac”), a wholly owned subsidiary of WMI (collectively, the “Company”, “we”, “us”, or “our”).

The condensed consolidated interim financial statements of the Company as of June 30, 2026 and for the three and six months ended June 30, 2026 and 2025 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The consolidated balance sheet at December 31, 2025 has been derived from audited consolidated financial statements, but does not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures are adequate to make the information presented not misleading.

All adjustments that, in the opinion of the management, are necessary for a fair presentation for the periods presented have been reflected. Such adjustments are of a normal, recurring nature. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”). The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any other interim period.

An operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the chief operating decision maker (the “CODM”) to make decisions about resources to be allocated to the segment and assess its performance. Operating segments may be aggregated only to a limited extent. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The Company has determined that it has a single operating and reportable segment.

The Company maintains its cash in multiple financial institutions. The balances are insured by the Federal Deposit Insurance Corporation. From time to time, the Company’s balances may exceed insurance limits. As of June 30, 2026, the Company had $458,011 of uninsured balances. The Company limits its credit risk by selecting financial institutions considered to be highly creditworthy.

Recently Issued Accounting Standards – Not Adopted

In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). This guidance removes all references to prospective and sequential stages (referred to as “project stages”) throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs. Under ASU 2025-06, cost capitalization should only commence when both management has authorized and committed to funding a software project and it is probable the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. Entities may apply the guidance using a prospective, modified transition or retrospective approach. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the preferred transition approach and assessing the impact of the ASU on our disclosures and financial statements, including the timing of adoption.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220- 40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. In January 2025, the FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, which will be our interim period beginning January 1, 2028. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact of these standards on its consolidated financial statements and related disclosures.

2.	REVENUE

Disaggregation of Revenue

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

	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Government subcontracts	$	15,340,158	$	12,266,475	$	30,019,135	$	23,593,083
Prime government contracts		716,367		1,335,358		2,480,423		4,128,970
Commercial contracts		1,525,007		1,577,275		2,441,914		2,857,663
	$	17,581,532	$	15,179,108	$	34,941,472	$	30,579,716

	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Revenue recognized using over time revenue recognition model	$	17,388,810	$	15,067,724	$	34,748,028	$	30,325,516
Revenue recognized using point in time revenue recognition model		192,722		111,384		193,444		254,200
	$	17,581,532	$	15,179,108	$	34,941,472	$	30,579,716

Favorable/(Unfavorable) Adjustments to Gross Profit

We review our Estimates at Completion (“EAC”) at least quarterly. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many inputs, and requires significant judgment by management on a contract-by-contract basis. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities, and the related changes in estimates of revenues and costs. The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, and related variable consideration. Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the performance obligation, the availability and timing of funding from our customer, and overhead cost rates, among others.

Changes in estimates of net sales, cost of sales, and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage-of-completion in the current period. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. Our EAC adjustments also include the establishment of, and changes to, loss provisions for our contracts accounted for on a percentage-of-completion basis. Net EAC adjustments had the following impact on our gross profit during the three and six months ended June 30, 2026 and 2025:

	Three months ended June 30,						Six months ended June 30,
	2026			2025			2026			2025
Net Adjustment	$	(676,503	)	$	(3,966,358	)	$	(1,408,692	)	$	(7,095,588	)

The net adjustment of $0.7 million and $1.4 million for the three and six months ended June 30, 2026 respectively, is driven primarily by unfavorable adjustments on our Embraer Phenom-300 Engine Inlet Assemblies program and Sikorsky UH60 Gunner Windows.

The net adjustment of $4.0 million for the three months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $2.3 million associated with the termination of our A-10 program. Additional net unfavorable adjustments of $1.7 million were driven primarily by the Next Generation Jammer (“NGJ”) Mid-Band Pod program and the T-38 Classic Structural Modification Kits program were due to increased labor and material costs.

The net adjustment of $7.1 million for the six months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $4.5 million associated with the termination of our A-10 program. Additional net unfavorable adjustments of $2.6 million were driven primarily by the NGJ Mid-Band Pod and the T-38 Classic Structural Modification Kits program were due to increased labor and material costs.

Transaction Price Allocated to Remaining Performance Obligations

As of June 30, 2026, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately $100 million. This represents the amount of revenue the Company expects to recognize in the future on contracts with unsatisfied or partially satisfied performance obligations as of June 30, 2026.

3.	CONTRACT ASSETS AND LIABILITIES

Contract assets represent revenue recognized on contracts in excess of amounts invoiced to the customers and the Company’s right to consideration is conditional on something other than the passage of time. Amounts may not exceed their net realizable value. Under the typical payment terms of our government as well as military contractor contracts, the customer retains a portion of the contract price until completion of the contract, as a measure of protection for the customer. Our government and military contract or contracts therefore typically result in revenue recognized in excess of billings, which we present as contract assets. Contract assets are classified as current assets. The Company’s contract liabilities represent customer payments received or due from the customer in excess of revenue recognized. Contract liabilities are classified as current liabilities.

June 30,

2026

December 31,

2025

December 31,

2024

Contract assets

34,278,512

33,670,354

32,832,290

Contract liabilities

2,970,578

1,628,382

2,430,663

Revenue recognized for the six months ended June 30, 2026 and 2025 that was included in the contract liabilities balance as of January 1, 2026 and 2025, was approximately $1.2 million and $1.4 million, respectively.

4.	INVENTORY

The components of inventory consisted of the following:

	June 30, 2026		December 31, 2025
Raw materials	$	356,208	$	524,883
Work in progress		13,557		7,547
Finished goods		250,503		268,393
Inventory	$	620,268	$	800,823

5.	STOCK-BASED COMPENSATION

In 2009, the Company adopted the Performance Equity Plan 2009 (the “2009 Plan”). The 2009 Plan reserved 500,000 common shares for issuance. The 2009 Plan provides for the issuance of either incentive stock options or nonqualified stock options to employees, consultants or others who provide services to the Company. The Company has 2,364 shares available for grant under the 2009 Plan as of June 30, 2026.

In 2016, the Company adopted the 2016 Long Term Incentive Plan (the “2016 Plan”). The 2016 Plan reserved 600,000 common shares for issuance, provided that no more than 200,000 common shares be granted as incentive stock options. Awards may be made or granted to employees, officers, directors and consultants in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. Any shares of common stock granted in connection with awards other than stock options and stock appreciation rights are counted against the number of shares reserved for issuance under the 2016 Plan as one and one-half shares of common stock for every one share of common stock granted in connection with such award. Any shares of common stock granted in connection with stock options and stock appreciation rights are counted against the number of shares reserved for issuance under the 2016 Plan as one share for every one share of common stock issuable upon the exercise of such stock option or stock appreciation right awarded. In the fourth quarter of 2020, the Company added 800,000 shares to the 2016 Plan, which increased the number of shares reserved for issuance under the 2016 Plan to 1,400,000 shares. In the second quarter of 2023, the Company added an additional 800,000 shares to the 2016 Plan, which increased the number of shares reserved for issuance under the 2016 Plan to 2,200,000 shares. The Company has 243,574 shares available for grant under the 2016 Plan as of June 30, 2026.

On June 24, 2025, the shareholders of the Company approved the 2025 Long-Term Incentive Plan (the “2025 Plan”) at the Company’s 2025 annual meeting of shareholders. The 2025 Plan had previously been approved by the Company’s Board of Directors (the “Board”) on April 28, 2025, upon the recommendation of the Company’s Compensation and Human Resources Committee, subject to shareholder approval. The 2025 Plan is intended to advance the Company’s interests by providing equity-based incentives to attract, retain, and motivate employees, officers, directors, and consultants. The plan authorizes the issuance of up to 800,000 shares of the Company’s common stock and allows for a variety of award types, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock-based awards. The 2025 Plan is administered by the Company’s Compensation and Human Resources Committee, which has broad authority to determine the terms of individual awards, including eligibility, size, vesting conditions, performance criteria, and other terms. Awards may generally not be transferred and are subject to forfeiture under certain conditions. The Company had 472,351 shares available for grant under the 2025 Plan as of June 30, 2026.

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


	Three months ended June 30,				Six months ended June 30,
	2026		2025		2026		2025
Cost of sales	$	23,880	$	—	$	16,133	$	—
Selling, general and administrative		122,329		168,583		365,363		488,812
Total stock-based compensation expense	$	146,209	$	168,583	$	381,496	$	488,812

The Company grants restricted stock units (“RSUs”) to its board of directors as partial compensation. The 2026 RSUs vest annually. and are expensed on a straight-line basis. These RSUs will fully vest on January 10, 2027.

The following table summarizes activity related to outstanding RSUs for the six months ended June 30, 2026:

	RSUs		Weighted Average Grant Date Fair Value of RSUs
Non-vested – January 1, 2026		—	$	—
Granted		125,003	$	4.18
Vested		—	$	—
Forfeited		—	$	—
Non-vested – June 30, 2026		125,003	$	4.18

The Company grants shares of common stock (“Restricted Stock Awards” or “RSAs”) to select employees. These shares have various vesting dates, ranging from vesting on the grant date to as late as four years from the date of grant. In the event that the employee’s employment is voluntarily terminated prior to certain vesting dates, portions of the shares may be forfeited. At June 30, 2026, the weighted average remaining amortization period was 3.0 years.

The following table summarizes activity related to outstanding Restricted Stock Awards for the six months ended June 30, 2026:

	Restricted Stock Awards		Weighted Average Grant Date Fair Value of RSA
Non-vested – January 1, 2026		148,127	$	2.92
Granted		83,015	$	4.86
Vested		(70,043)	$	3.27
Forfeited		(11,621)	$	3.04
Non-vested – June 30, 2026		149,478	$	3.83

The Company grants shares of common stock (“Performance Restricted Stock Awards” or “PRSAs”) to select officers as part of our long-term incentive program that will result in that number of PRSAs being paid out if the target performance metric is achieved. The award vesting is based on specific performance metrics related to accounts payable delinquency, debt, and net income during the performance period. The PRSAs vest at 0% or 100% and all three metrics must be met to vest at 100%. The PRSAs granted under this program will vest on the fourth anniversary of the grant date, subject to the aforementioned performance criteria. At June 30, 2026, the weighted average remaining amortization period was 2.5 years.

The following table summarizes activity related to outstanding PRSAs for the six months ended June 30, 2026:

	PRSAs		Weighted Average Grant Date Fair Value of PRSAs
Non-vested – January 1, 2026		57,376	$	2.96
Granted		58,613	$	3.58
Vested		—	$	—
Forfeited		(57,376)	$	2.96
Non-vested – June 30, 2026		58,613	$	3.58

The fair value of all RSUs, PRSAs and RSAs is based on the closing price of our common stock on the grant date. All RSUs, PRSAs, and Restricted Stock Awards vest and settle in common stock (on a one-for-one basis).

As of June 30, 2026, unamortized stock-based compensation costs related to restricted share arrangements was $669,476.

6.	NET INCOME (LOSS) PER SHARE

Basic income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted income (loss) per common share for the three and six months ended June 30, 2026 and 2025 is computed using the weighted-average number of common shares outstanding adjusted for the effect of unvested RSUs and RSAs. Incremental shares of 134,454 and 171,139 were used in the calculation of diluted income per common share for the three and six months ended June 30, 2026, respectively. Securities that could potentially dilute basic earnings per share in the future, but that were excluded from the computation of diluted earnings per share because they were antidilutive for the three and six months ended June 30, 2025 include 61,114 RSU and 108,800 RSA.

7.	LINE OF CREDIT AND LONG-TERM DEBT

On December 12, 2025, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Western Alliance Bank (the “Bank”). The Loan and Security Agreement provides for a revolving line of credit in the maximum principal amount of $10,000,000 (the “Revolving Line”) and a term loan in the original principal amount of $10,000,000 (the “Term Loan” and, together with the Revolving Line, the “Credit Facilities”). WMI and Compac, have guaranteed the Company’s obligations under the Loan and Security Agreement.

Borrowings under the Credit Facilities bear interest at a variable rate equal to the 1-month Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin as set forth in the Loan and Security Agreement. During the continuance of an event of default, all outstanding obligations bear interest at a rate equal to 5% above the rate otherwise applicable.

The SOFR Rate was 3.7% as of June 30, 2026 and as such, the Company’s interest rate on the Revolving Line and Term Loan was 6.2% as of June 30, 2026.

Our Credit Facilities consisted of the following as of:

	June 30,		December 31,
	2026		2025
Long-term debt	$	9,937,500