<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period Commission File Number 1-11398
ended June 30, 1996
CPI AEROSTRUCTURES, INC.
(Exact Name of Small Business Issuer as Specified in its Character)
New York 11-2520310
- --------------------------------- ------------------------------------
(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation or Organization)
200A EXECUTIVE DRIVE, EDGEWOOD, NY 11717
(Address of Principal Executive Offices)
Telephone number (516) 586-5200
(Issuer's Telephone Number Including Area Code)
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 such 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 X No
--- ---
The number of shares of common stock, par value $.001 per share, outstanding was
5,778,304 as of October 15, 1996.
===============================================================================
<PAGE>
CPI AEROSTRUCTURES, INC.
INDEX
===============================================================================
Part I. Financial Information:
Item 1 - Financial Statements:
Balance Sheets as of September 30, 1996 (Unaudited) and
December 31, 1995 3
Statements of Income for the Three and Nine Months ended
September 30, 1996 (Unaudited) and 1995 (Unaudited) 4
Statements of Cash Flows for the Nine Months ended
September 30, 1996 (Unaudited) and 1995 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II. Other
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
CPI AEROSTRUCTURES, INC.
BALANCE SHEETS
=============================================================================
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 485,612 $ 998,517
Accounts receivable 1,629,960 1,565,048
Costs and estimated earnings in excess of billings on uncompleted 10,651,431 9,677,390
contracts (Note 2)
Other current assets 62,487 329,199
- ----------------------------------------------------------------------------------------------------------------------
Total current assets 12,829,490 12,570,154
Property, Plant and Equipment, net 176,243 196,384
Deferred Income Taxes 113,000 113,000
Other Assets 29,226 75,519
======================================================================================================================
Total Assets $13,147,959 $12,955,057
======================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,432,001 $ 1,160,285
Accrued expenses 379,136 260,288
Current portion of long-term debt 11,398 630,525
Deferred income taxes 445,000 445,000
- ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,267,535 2,496,098
Long-term Debt - 1,730,229
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 2,267,535 4,226,327
- ----------------------------------------------------------------------------------------------------------------------
Commitments
Shareholders' Equity:
Common stock - $.001 par value; authorized 10,000,000 shares,
5,778,304 and 3,728,304 issued and outstanding, respectively 5,778 3,728
Additional paid-in capital 9,101,560 7,436,079
Retained earnings 1,773,086 1,288,923
- ----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 10,880,424 8,728,730
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $13,147,959 $12,955,057
======================================================================================================================
</TABLE>
See Notes to Financial Statements
3
<PAGE>
CPI AEROSTRUCTURES, INC.
STATEMENTS OF INCOME
==============================================================================
<TABLE>
<CAPTION>
For the Three Months ended For the Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $1,645,955 $1,097,391 $4,832,448 $3,459,422
Cost of sales 989,090 668,213 3,011,272 1,972,201
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 656,865 429,178 1,821,176 1,487,221
Selling, general and administrative 416,695 259,971 1,084,191 869,576
expenses
- ----------------------------------------------------------------------------------------------------------------------
Income from operations 240,170 169,207 736,985 617,645
- ----------------------------------------------------------------------------------------------------------------------
Other (income) expense:
Interest income (4,604) (24,251) (39,256) (36,896)
Interest expense 573 99,681 110,024 314,678
- ----------------------------------------------------------------------------------------------------------------------
Total other expenses, net (4,031) 75,430 70,768 277,782
- ----------------------------------------------------------------------------------------------------------------------
Income before costs from terminated
acquisition 244,201 93,777 666,217 339,863
Cost of terminated acquisition - 187,756 - - 187,756
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before provision (credit)
for income taxes and exraordinary item 244,201 (93,979) 666,217 152,107
Provision (credit) for income taxes 86,000 (30,000) 233,000 75,000
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item $ 158,201 $ (63,979) $ 433,217 $ 77,107
Extraordinary item - gain on early
extinguishment of debt, net of provision
for income taxes of $28,000 - - 50,947 -
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 158,201 $ (63,979) $ 484,164 $ 77,107
======================================================================================================================
Earnings per shares (Note 3):
Income before extra ordinary item $ .02 $ (.02) $ .09 $ .02
Extraordinary item $ - $ - $ .01 $ -
- ----------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ .02 $ (.02) $ .10 $ .02
======================================================================================================================
Weighted average shares and common
share equivalents outstanding 6,800,444 3,744,566 4,779,027 3,744,482
======================================================================================================================
</TABLE>
See Notes to Financial Statements
4
<PAGE>
CPI AEROSTRUCTURES, INC.
STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
For the Nine months Ended September 30, 1996 1995
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 484,164 $ 77,107
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 60,279 93,253
Extraordinary item (50,947)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (64,912) 977,252
Decrease in prepaid expenses and other current assets 266,712 53,768
Increase in costs and estimated earnings in excess of billings on
uncompleted contracts (974,041) (1,207,725)
Decrease in other assets 46,293 33,496
Increase in accounts payable 271,397 9,823
Increase (decrease) in accrued expenses 70,113 (147,806)
Increase in income taxes payable - 75,000
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 109,058 (35,832)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (40,138) -
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (40,138) -
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term debt and officer note payments (2,249,356) (576,628)
Proceeds from exercise of stock options/warrants/private placement 1,667,531 145,174
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (581,825) (431,454)
- ----------------------------------------------------------------------------------------------------------------------
Net (decrease) in cash (512,905) (467,286)
Cash at beginning of year 998,517 1,796,095
- ----------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 485,612 $ 1,328,809
======================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 132,509 $ 359,551
======================================================================================================================
Income taxes $ 12,597 $ 32,926
======================================================================================================================
</TABLE>
See Notes to Financial Statements
5
<PAGE>
CPI AEROSTRUCTURES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
==============================================================================
1. INTERIM FINANCIAL STATEMENTS
The financial statements as of September 30, 1996 and for the nine and three
months ended September 30, 1996 and 1995 are unaudited. In the opinion of the
management of the Company, these financial statements reflect all adjustments
(consisting solely of normal recurring adjustments) necessary to present
fairly the financial position of the Company and the results of operations
for such interim periods are not necessarily indicative of the results to be
obtained for a full year. .
2. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS:
Costs and estimated earnings in excess of billings on uncompleted contracts
consist of:
<TABLE>
<CAPTION>
September 30, 1996
----------------------------------------------------------------------------------------
U.S.
Government Commercial Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts $769,974 $21,978,553 $22,748,527
Estimated earnings 302,380 12,313,644 12,616,024
-----------------------------------------------------------------------------------------
1,072,354 34,292,197 35,364,551
Less billings to date 720,763 23,992,357 24,713,120
-----------------------------------------------------------------------------------------
Costs and estimated earnings
in excess of billings on
uncompleted contracts $351,591 $10,299,840 $10,651,431
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995
----------------------------------------------------------------------------------------
U.S.
Government Commercial Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts $631,426 $19,738,969 $20,370,395
Estimated earnings 201,250 10,777,343 10,978,593
-----------------------------------------------------------------------------------------
832,676 30,516,312 31,348,988
Less billings to date 716,030 20,955,568 21,671,598
----------------------------------------------------------------------------------------
Costs and estimated earnings
in excess of billings on
uncompleted contracts $116,646 $9,560,744 $9,677,390
=========================================================================================
</TABLE>
6
<PAGE>
CPI AEROSTRUCTURES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
==============================================================================
3. EARNINGS PER COMMON SHARE:
The earnings per share calculations are computed by dividing net income,
increased by proforma reductions in interest expense (net of tax) resulting
from the assumed exercise of stock options and warrants and the resulting
assumed reduction of outstanding indebtedness, by the weighted average number
of common and common equivalent shares outstanding.
7
<PAGE>
CPI AEROSTRUCTURES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
===============================================================================
Material Changes in Results of Operations
The Company's revenues for the three months ended September 30, 1996 were
$1,645,955 compared to $1,097,391 for the same period last year, representing an
increase of $548,564, or 50%. Revenues for the nine month period ended September
30, 1996 were $4,832,448 compared to $3,459,422 for the same period last year,
representing an increase of $1,373,026 or 40%. This increase is due in part to
an accelerated delivery schedule of Apron assemblies which the Company builds
for Rohr Industries, for use on the MD-90 aircraft. Additionally, revenues were
recorded from the Company's new military contracts, which were awarded in late
1995, as the Company commenced deliveries of spare parts for the C-5 aircraft
during the nine months ended September 30, 1996. It is anticipated that because
of these new contracts, and specifically the increased magnitude of the C-5
contract, that the Company's revenues should remain at a higher level than 1995.
Commercial aircraft programs represented 78% of total revenues for the nine
months ended September 30, 1996 compared to 95% for the same period in 1995.
The above statements discussed in this Report include forward looking statements
that involve risks and uncertainties, including the timely delivery and
acceptance of the Company's products and the other risks detailed from time to
time in the Company's SEC reports.
Gross profit increased by $227,687, or 53%, from the three months ended
September 30, 1995 to the three months ended September 30, 1996. Gross profit
for the nine month period ended September 30, 1996 was $1,821,176 compared to
$1,487,221 for the same period last year, representing an increase of $333,955
or 22%. Gross profit as a percentage of revenues for the nine months ended
September 30, 1996 was 38% compared to 43% for the same period last year.
Selling, general, and administrative expenses increased by $156,724 or 60%, from
the three months ended September 30, 1995 to the three months ended September
30, 1996. Selling, general and administrative expenses for the nine months ended
September 30, 1996 were $1,084,191 compared to $869,576 for the comparable
period last year, representing an increase of $214,615 or 25%. Interest expense
decreased by $204,654, or 65%, for the nine months ended September 30, 1996,
primarily attributable to a reduction in debt to Chrysler Capital Corporation,
("Chrysler") and the extinguishment of the Company's debt to Chase Manhattan for
the mortgage on its building, which was sold in December, 1995.
The resulting net income for the three months ended September 30, 1996, was
$158,201 versus a net loss of $63,979 for the same period last year. Net income
for the nine months ended September 30, 1996 was $484,164 compared to $77,107
for the same period last year, representing an increase of $407,057 or 528%.
Earnings per share were $.10 for the nine months ended September 30, 1996, based
upon the weighted average common shares outstanding of 4,779,027 as compared to
earnings per share of $.02 for the nine months ended September 30, 1995 based
upon the weighted average common shares outstanding of 3,744,482.
Material Changes in Financial Condition
At September 30, 1996 and December 31, 1995, the Company had working capital of
$10,561,955 and $10,074,056, respectively, an increase of $487,899. This is
primarily attributable to the retirement of the Company's debt to Chrysler. On
June 19, 1996, the Company completed a $2,050,000 Equity Private Placement. The
net proceeds of the offering, along with working capital, were used to eliminate
the Company's debt to Chrysler.
8
<PAGE>
CPI AEROSTRUCTURES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
===============================================================================
The Company has financed its working capital requirements during the past three
years through borrowings primarily from Chrysler, the Company's initial public
offering and subsequent warrant exercise, and operating cash flow. Historically,
a large portion of the Company's cash has been used for costs and estimated
earnings in excess of billings. Costs and estimated earnings in excess of
billings includes the aggregate of costs and related profit which has been
incurred and earned in performance of work for which the Company has firm
contracts, but has not yet been billed to the customer. Costs and estimated
earnings are recoverable upon shipment of products, presentation of billings in
accordance with contract terms or completion of a contract.
Net cash provided by operating activities for the nine months ended September
30, 1996 was $109,058. This increase in cash was primarily the result of net
income of $484,164 and an increase in accounts payable of $271,397 and an
increase in accrued expenses of $70,113 and a decrease in prepaid expenses and
other current assets of $266,712 offset by an increase in costs and estimated
earnings in excess of billings of $974,041 and an increase in accounts
receivable of $64,912. The Company's continued requirement to incur significant
costs in connection with commercial contracts in advance of receipt of
associated cash has caused the increase in costs and estimated earnings in
excess of billings on uncompleted contracts.
9
<PAGE>
CPI AEROSTRUCTURES, INC.
===============================================================================
ITEM 6. Exhibits and Reports on Form 8-K
a) No Exhibits
b) No reports on Form 8-K were filed with the Securities and
Exchange Commission during the three month period ended
September 30, 1996.
10
<PAGE>
CPI AEROSTRUCTURES, INC.
===============================================================================
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CPI AEROSTRUCTURES, INC.
Dated: November 1, 1996
-------------------- By: /s/ Arthur August
----------------------------
Arthur August
President
(Principal Executive Officer)
Dated: November 1, 1996 By: /s/ Theodore J. Martines
-------------------- -------------------------------
Theodore J. Martines
Executive Vice President
(Principal Financial Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 485,612
<SECURITIES> 0
<RECEIVABLES> 1,629,960
<ALLOWANCES> 0
<INVENTORY> 10,651,431
<CURRENT-ASSETS> 62,487
<PP&E> 516,366
<DEPRECIATION> 340,123
<TOTAL-ASSETS> 13,147,959
<CURRENT-LIABILITIES> 2,267,535
<BONDS> 0
0
0
<COMMON> 5,778
<OTHER-SE> 18,874,646
<TOTAL-LIABILITY-AND-EQUITY> 13,147,959
<SALES> 4,832,448
<TOTAL-REVENUES> 4,832,448
<CGS> 3,011,272
<TOTAL-COSTS> 3,011,272
<OTHER-EXPENSES> 1,084,191
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,024
<INCOME-PRETAX> 666,217
<INCOME-TAX> 233,000
<INCOME-CONTINUING> 433,217
<DISCONTINUED> 0
<EXTRAORDINARY> 50,947
<CHANGES> 0
<NET-INCOME> 484,164
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
