Edward J. Fred has been an officer since February 1995 and a member of our board of directors since January 1999. He was our controller from February 1995 to April 1998, when he was appointed chief financial officer, a position he held until June 2003 and then from January 2004 to May 2004. He was executive vice president from May 2000 until December 2001 and was appointed to the position of president in January 2002 and to the position of chief executive officer in January 2003. For approximately ten years prior to joining our company, Mr. Fred served in various positions for the international division of Grumman, where he last held the position of controller. Mr. Fred holds a Bachelor of Business Administration in Accounting from Dowling College and an Executive MBA from Hofstra University.

Arthur August, one of our founders, has been our chairman emeritus since January 2005 and a director since January 1980. From January 1980 until December 2004, he was chairman of the board of directors and was our president until December 2001 and our chief executive officer until December 2002. From 1956 to 1979, Mr. August was employed by Northrop Grumman Corporation where he last held the position of deputy director. Mr. August holds a certificate in Aeronautical Design from the Academy of Aeronautics, a Bachelor of Science degree in Industrial Management from C. W. Post College, a Masters degree in Engineering from New York University and is a graduate of the Program for Management Development at the Harvard Graduate School of Business.

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

Walter Paulick has been a director since April 1992 and chairman of our nominating committee since March 2004. Mr. Paulick is currently a self-employed financial consultant. From 1982 to November 1992, Mr. Paulick was a vice president of Parr Development Company, Inc., a real estate development company. From 1980 to 1982, Mr. Paulick was employed by Key Bank, where he last held the position of vice president. From 1971 to 1980, Mr. Paulick was a vice president of National Westminster U.S.A. Mr. Paulick holds an associate degree in Applied Science from Suffolk Community College and Bachelor of Business Administration from Dowling College.

Kenneth McSweeney has been a director since February 1998 and chairman of our compensation committee since April 2003. Mr. McSweeney has been an independent consultant to the aerospace industry since January 1995. From 1961 to 1995, Mr. McSweeney served in various management positions for Northrop Grumman Corporation, most recently as the vice president of its Aerostructures Division and a director of business development for the Mideast and gulf coast region. Mr. McSweeney has extensive experience in aerostructures and logistics support products and is a licensed professional engineer in New York State. He holds Bachelor and Master of Science degrees in Electrical Engineering from the Polytechnic Institute of Brooklyn and a Masters degree in Business Management from CW Post College. He also completed the Executive Development Program at the Cornell School of Business and Public Administration.

A. C. Providenti has been a director and chairman 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 and administration and as an executive committee member for Northville Industries Corp., a multinational petroleum storage, trading and distribution company. Mr. Providenti holds a Bachelor's degree in Accounting from St. Francis College and a Masters of Business Administration from Fordham University.

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

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development in January 2004. From 1977 to 1988, was employed by Fairchild Republic Company where he served as Chief Industrial Engineer, Manufacturing Engineering Manager and Director of Program Planning and Control. From 1966 to 1977, he was with Grumman Aerospace where he served as Industrial Engineer, Manager of Manufacturing Planning and Control and Program Planning and Resource Control Manager. Mr. Funicelli holds a Bachelor of Science degree in Industrial Engineering from Pratt Institute and a Master of Science in Management Engineering from C.W. Post College.

Our board of directors is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term. The term of office of the first class of directors (Class I), consisting of Kenneth McSweeney and A.C. Providenti, will expire at our annual meeting in 2005. The term of office of the second class of directors (Class II), consisting of Walter Paulick and Eric Rosenfeld, will expire at our annual meeting in 2006. The term of office of the third class of directors (Class III), consisting of Arthur August and Edward J. Fred, will expire at our annual meeting in 2007.

Section 16(a) Beneficial Ownership Reporting Compliance

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

Audit Committee Financial Expert

Currently, our audit committee is comprised of Walter Paulick, Kenneth McSweeney and A.C. Providenti, with Mr. Providenti serving as the chairman of the audit committee. The board of directors believes that Mr. Providenti is an "audit committee financial expert" (as defined in Regulation 228.401(e)(1)(i)(A) of Regulation S-B). The board of directors also believes 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 of Ethics

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

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Item 10.    EXECUTIVE COMPENSATION

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

Name/Position				Year				Salary				Bonus				Long-Term Compensation Securities Underlying Options/SARs(#)
Edward J. Fred					2004			$243,908				$203,041					-0-
Chief Executive Officer					2003			$228,242				$174,800					-0-
President					2002			$209,287				$90,330					100,000
Arthur August					2004			$122,157				$101,521					-0-
Chairman Emeritus					2003			$126,612				$184,000					-0-
					2002			$317,237				$180,660					85,000
Vincent Palazzolo					2004			$110,485				$31,725					50,000
Chief Financial Officer(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 Grants in 2004

Number of Securities Underlying Options Granted(#)

Percent of Options Granted to Employees in Fiscal Year(1)

Exercise Price ($/Share)

Expiration Date

Vincent Palazzolo

50,000

66   2/3

%

$10.48

5/16/2014

(1)	We granted a total of 75,000 options to employees in the fiscal year ended December 31, 2004.

Aggregated Option Exercises and Option Values

Name

Shares Acquired on Exercise (#)

Value Realized

Number of Securities Underlying Unexercised Options at December 31, 2004 Exercisable/Unexercisable

Value of Unexercised In-The-Money Options At December 31, 2004($) Exercisable/Unexercisable(1)

Edward J. Fred

-0-

-0-

398,334/0

$2,820,553/0

Arthur August

115,000

$871,150

385,000/0

$2,818,550/0

Vincent Palazzolo

-0-

-0-

50,000/0

$0/0

(1)	These values are based on the difference between the closing sale price of our common stock on December 31, 2004 of $11.45 and the exercise price of the options.

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Employment Agreements

Edward J. Fred

In February 2005, we entered into an amended and restated employment agreement with Edward J. Fred, which provides for Mr. Fred to serve as our President and Chief Executive Officer until December 31, 2007. Mr. Fred's annual base salary is currently $252,000 and will increase to $267,120 on January 1, 2006 and to $283,150 on January 1, 2007. In addition, Mr. Fred is eligible to receive an annual bonus, which for the year ended December 31, 2004 was equal to 4% of our consolidated net income. For the years ending December 31, 2005, 2006 and 2007, Mr. Fred's annual bonus will be based on changes in our revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") from the prior year. 25% of the bonus amount is determined by revenues and 75% by EBITDA. To the extent that a 10% annual increase in revenues and EBITDA from the prior year is achieved, Mr. Fred will be entitled to a target annual bonus equal to 65% of his annual base salary. Should the revenue and/or EBITDA levels fall short of or exceed a 10% increase from the prior year, Mr. Fred's bonus will decrease or increase by predetermined percentages. If there is more than a 15% annual decrease in EBITDA or revenues, no EBITDA bonus or revenue bonus will be paid. If there is an annual increase of 100% or more in EBITDA or revenues, Mr. Fred's EBITDA bonus or revenue bonus will be 75% more than the target annual bonus. Both bonuses will be adjusted pro rata if EBITDA and/or revenues fall in between two designated percentages. The first $140,000 of bonus will be paid in cash and the balance will be paid half in cash and half in shares of our common stock. The shares of common stock will be valued at the average of the last sale prices of the common stock for five consecutive trading days ending two trading days before issuance. Pursuant to the terms of Mr. Fred's employment agreement, if a change of control (as such term is defined in the agreement) occurs prior to a termination by us without "cause" or by Mr. Fred for "good reason" (as such terms are defined in the agreement), we must pay him a lump sum equal to 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 his employment and for two years thereafter.

Arthur August

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

Vincent Palazzolo

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

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achieved, Mr. Palazzolo will be entitled to a target annual bonus equal to 45% of his annual base salary. Should the revenue and/or EBITDA levels fall short of or exceed a 10% increase from the prior year, Mr. Palazzolo's bonus will decrease or increase by predetermined percentages. If there is more than a 15% annual decrease in EBITDA or revenues, no EBITDA bonus or revenue bonus will be paid. If there is an annual increase of 100% or more in EBITDA or revenues, Mr. Palazzolo's EBITDA bonus or revenue bonus will be 75% more than the target annual bonus. Both bonuses will be adjusted pro rata if EBITDA and/or revenues fall in between two designated percentages. The first $75,000 of bonus will be paid in cash and the balance will be paid half in cash and half in shares of our common stock. The shares of common stock will be valued at the average of the last sale prices of the common stock for five consecutive trading days ending two trading days before issuance. Pursuant to the terms of Mr. Palazzolo's employment agreement, if a change of control (as such term is defined in the agreement) occurs prior to a termination by us without "cause" or by Mr. Palazzolo for "good reason" (as such terms are defined in the agreement), Mr. Palazzolo may elect to receive a lump sum equal to $50,000 within 10 days of such election in lieu of his compensation and benefits under the employment agreement. Mr. Palazzolo also has agreed not to compete with us during the term of his employment and for two years thereafter.

Compensation Arrangements for Directors

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

Employee Benefit Plans

In October 2000, we adopted the Greit Plan for the purpose of offering senior management a deferred compensation death benefit plan that would provide a tax-free benefit for senior management 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 has since been terminated and the surrender value of the Greit Plan has been returned to Mr. August. Mr. August has placed the proceeds from the surrender value in an annuity in our name, which will appreciate to at least $150,000 by September 2011 in order to repay the loan made to him. Mr. August also assigned to us an insurance policy on his life in the amount of $150,000 and agreed to maintain it until the date upon which the annuity matures. Accordingly, the loan to Mr. August will be repaid upon the maturity date of the annuity or upon the death of Mr. August, whichever occurs first.

Stock Options

Performance Equity Plan 2000

The Performance Equity Plan 2000 authorizes the grant of 830,000 stock options, 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 been granted under this plan of which 700,750 options remain outstanding at exercise prices ranging from $1.20 to $10.24 per share. As of March 24, 2005, options to purchase 25,000 common shares remain available for grant.

1998 Performance Equity Plan

The 1998 Performance Equity Plan authorizes the grant of 463,334 stock options, stock appreciation rights, restricted stock, deferred stock, stock reload options, and other stock based

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

1995 Stock Option Plan

The 1995 Employee Stock Option Plan authorizes the grant of 200,000 stock options and stock appreciation rights. As of December 31, 2004, options to purchase an aggregate of 176,190 common shares had been granted, of which 136,668 remain outstanding at exercise prices ranging from $6.27 to $10.48 per share. As of March 24, 2005, options to purchase 23,810 additional common shares remain available for grant.

1992 Employee Stock Option Plan

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

Other Options and Warrants

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

On February 1, 2002, we granted to John Aneralla, the stepson of Arthur August, five-year non-plan options to purchase 5,000 common shares as compensation for consulting services. The exercise price of the options is $1.65, the fair market value of our common shares on the date of grant. As of December 31, 2004, none of these options had been exercised.

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Item 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The table and accompanying 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 beneficially owns more than 5% of our common shares;

	•	each of our directors;

	•	each of our Named Executive Officers; and

	•	all of our directors and executive officers as a group.

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

Name and Address of Beneficial Owner				Shares Beneficially Owned(1)				Percent of Class(2)
Edward J. Fred(3)					403,434	(4)			6.9	%
Arthur August(3)					604,419	(5)			10.4	%
Vincent Palazzolo(3)					25,000	(6)				*
Walter Paulick(3)					25,000	(7)				*
Kenneth McSweeney(3)					28,334	(8)				*
A. C. Providenti(3)					45,000	(9)				*
Eric Rosenfeld					969,334	(10)			17.8	%
c/o Crescendo Partners 10 East 53rd Street, 36th floor New York, NY 10022
Royce & Associates, LLC					364,900	(11)			6.7	%
1414 Avenue of the Americas New York, NY 10019
All directors and executive officers as a group (seven persons)					2,100,521	(12)			33.1	%

*	Less than 1%.

(1)	Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all common shares beneficially owned by them, subject to community property laws, where applicable.

(2)

There are 5,418,400 shares currently issued and outstanding. Each person beneficially owns a percentage of our outstanding common shares equal to a fraction, the numerator of which is the number of common shares held by such person plus the number of common shares that he can acquire within 60 days of March 24, 2005 upon the exercise or conversion of options, warrants or convertible securities and the denominator of which is 5,418,400 (the number of common shares currently outstanding) plus the number of shares he can so acquire during such 60-day period.

(3)	Unless otherwise noted, the business address of each of the following persons is c/o CPI Aerostructures, Inc., 60 Heartland Blvd., Edgewood, New York 11717.

(4)	Includes 398,334 common shares that Mr. Fred has the right to acquire upon exercise of options.

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

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(6)	Includes common shares that Mr. Palazzolo has the right to acquire upon exercise of options. Does not include 25,000 common shares underlying options granted to Mr. Palazzolo that do not become exercisable until May 2006.

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

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

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

(10)

Represents (a) 46,000 common shares beneficially owned as joint tenants by Mr. Rosenfeld and his wife; (b) 883,334 shares held by Crescendo Partners II, L.P. Series L ("Crescendo Partners II"); and (c) 40,000 common shares that Mr. Rosenfeld has the right to acquire upon exercise of options. Mr. Rosenfeld is the senior managing member of the sole general partner of Crescendo Partners II. Mr. Rosenfeld disclaims beneficial ownership of the shares held by Crescendo Partners II, except to the extent of his pecuniary interest therein. Does not include 10,000 common shares underlying options that will be granted to Mr. Rosenfeld on April 1, 2005.

(11)	The information with respect to Royce & Associates, LLC ("Royce") is based upon the Schedule 13G/A, dated January 21, 2005, filed by Royce with the Securities and Exchange Commission.

(12)	Includes an aggregate of 933,334 common shares that Messrs. Fred, August, Palazzolo, Paulick, McSweeney, Providenti and Rosenfeld have the right to acquire upon exercise of outstanding options.

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Equity Compensation Plan Information

The following table sets forth certain information at December 31, 2004 with respect to our equity compensation plans that provide for the issuance of options, warrants or rights to purchase our securities.

Plan Category				Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights				Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights				Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in the first column)
Equity Compensation Plans Approved by Security Holders				1,093,753				$4.65				59,476
Equity Compensation Plans Not Approved by Security Holders(1)				200,000				$4.33				-0-

(1)	See "Stock Options – Other Options and Warrants" description above.

Item 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

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

Item 13.    EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Number				Name of Exhibit				No. in Document
1.1				Form of Underwriting Agreement between EarlyBirdCapital, Inc. and the Company, dated February 12, 2003. (9)				1.1
3.1				Certificate of Incorporation of the Company, as amended. (1)				3.1
3.1(a)				Certificate of Amendment of Certificate of Incorporation filed on July 14, 1998. (3)				3.1(a)
3.2				Amended and Restated By-Laws of the Company. (12)				3.2
4.7				Form of Warrant issued to designees of EarlyBirdCapital, Inc., dated February 19, 2003. (11)				4.7
10.1				1992 Stock Option Plan. (1)				10.3
10.2				1995 Employee Stock Option Plan. (2)				10.4
10.3				Form of military contract. (1)				10.7
10.4				Asset Purchase 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 the Company. (5)				10.19

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Exhibit Number				Name of Exhibit				No. in Document
10.5				1998 Performance Equity Plan. (3)				10.28
10.6				Performance Equity Plan 2000. (4)				10.29
*10.7				Stock Option Agreement, dated August 14, 2001, between Edward J. Fred and the Company. (5)				10.35
*10.8				Stock Option Agreement, dated August 14, 2001, between Arthur August and the Company. (6)				10.36
*10.9				Employment Agreement, dated August 14, 2001, between Edward J. Fred and the Company. (7)				10.38
*10.10				Employment Agreement, dated August 14, 2001, between Arthur August and the Company. (7)				10.39
10.11				Auction Sale Agreement among Kolar, Inc., JP Morgan Chase and JP Morgan Leasing, Inc., dated January 10, 2002. (8)				10.40
*10.12				Stock Option Agreement between the Company and Arthur August, dated June 18, 2002. (9)				10.55
*10.13				Stock Option Agreement 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 the Company. (11)				10.26
10.15				Registration Rights Agreement between the Company and Chemical Investments dated February 26, 2002, as assigned to Crescendo Partners, II. (11)				10.27
10.15.1				Schedule of Omitted Document in the form of Exhibit 10.16, including material detail in which such document differs from Exhibit 10.16. (11)				10.27.1
*10.16				Letter Agreement Amending Employment Agreement between Edward J. Fred and the Company, dated December 12, 2002 (11)				10.28
*10.17				Letter Agreement Amending Employment Agreement, between Edward J. Fred and the Company, dated January 1, 2003. (11)				10.29
*10.18				Letter Agreement Amending Employment Agreement between Arthur August and the Company, dated January 1, 2003 (11)				10.30
*10.19				Stock Option Agreement between Vincent Palazzolo and the Company dated as of May 17, 2004 (12)				10.22
*10.20				Letter Agreement Amending Employment Agreement between Arthur August and the Company, dated October 28, 2004. (13)				10.22
*10.21				Amended and Restated Employment Agreement between Edward J. Fred and the Company, dated February 7, 2005. (14)				10.23
*10.22				Amended and Restated Employment Agreement between Vincent Palazzolo and the Company, dated February 7, 2005. (14)				10.24
14				Code of Business Conduct and Ethics (15)				14
**21				Subsidiaries of the Registrant.				N/A
**23.1				Consent of J.H. Cohn LLP				N/A
**23.2				Consent of Goldstein Golub Kessler LLP				N/A
**31.1				Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer				N/A
**31.2				Rule 13a-14(a)/15d-14(a) Certification of and Chief Financial Officer				N/A

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Exhibit Number				Name of Exhibit				No. in Document
**32.1				Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002				N/A

*	Management compensation contract or arrangement.

**	Filed herewith.

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

(2)	Filed as an exhibit to the Company's Annual Report on Form 10-KSB for year ended December 31, 1995 and incorporated herein by reference.

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

(4)	Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000 and incorporated herein by reference.

(5)	Filed as an exhibit to Schedule 13D filed on behalf of Edward J. Fred on October 19, 2001 and incorporated herein by reference.

(6)	Filed as an exhibit to Schedule 13D filed on behalf of Arthur August on October 19, 2001 and incorporated herein by reference.

(7)	Filed as an exhibit to the Company's Quarterly 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's Current Report on Form 8-K dated January 22, 2002, as amended, and incorporated herein by reference.

(9)	Filed as an exhibit to Schedule 13D filed on behalf of Arthur August on July 12, 2002 and incorporated herein by reference.

(10)	Filed as an exhibit to Schedule 13D filed on behalf of Edward J. Fred on July 12, 2002 and incorporated herein by reference.

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

(12)	Filed as an exhibit to the Company's Current Report on Form 8-K dated May 24, 2004 and incorporated herein by reference.

(13)	Filed as an exhibit to the Company's Current Report on Form 8-K dated October 28, 2004 and incorporated herein by reference.

(14)	Filed as an exhibit to the Company's Current Report on Form 8-K dated February 7, 2005 and incorporated herein by reference.

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

Page 27

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(b) Reports on Form 8-K

During the three months ended December 31, 2004 and through March 25, 2005, we filed the following Current Reports on Form 8-K:

1.	Form 8-K dated October 28, 2004 , and filed with the SEC on November 1, 2004, which Form 8-K reported events under Items 1.01, 2.02, 5.03, 8.01 and 9.01.

2.	Form 8-K dated February 7, 2005, and filed with the SEC on February 10, 2005, which Form 8-K reported events under Items 1.01 and 9.01.

Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit and Non-Audit Fees

				2004				2003
Audit Fees(1)				$	221,405			$	164,261
Audit-Related Fees					-0-				-0-
Tax Fees(2)				$	20,600			$	29,024
All Other Fees					31,500				-0-
Total				$	273,505			$	193,285

(1)

Represents the aggregate fees billed for professional services rendered by our principal accountants for the audits of our annual financial statements for the years ended December 31, 2004 and December 31, 2003 and review of financial statements included in our quarterly reports on Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those periods.

(2)	Represents the aggregate fees billed for professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning for the year ended December 31, 2003.

Audit Committee Pre-Approval Policies and Procedures

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

Page 28

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CPI AEROSTRUCTURES, INC.

INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms				F-2
Financial Statements:
Balance Sheet as of December 31, 2004				F-4
Statements of Income for the Years Ended December 31, 2004 and 2003				F-5
Statement of Shareholders' Equity for the Years Ended December 31, 2004 and 2003				F-6
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003				F-7
Notes to Financial Statements				F-8 - F-17

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
CPI Aerostructures, Inc.

We have audited the accompanying balance sheet of CPI Aerostructures, Inc. as of December 31, 2004, and the related statements of income, changes in shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our 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 cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

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

Jericho, New York
March 16, 2005

F-2

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
CPI Aerostructures, Inc.

We have audited the accompanying statements of income, shareholders' equity and cash flows of CPI Aerostructures, Inc. for the year ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the results of the operations of CPI Aerostructures, Inc. and its cash flows for the year ended December 31, 2003 in conformity with United States generally accepted accounting principles.

/s/ Goldstein Golub Kessler LLP
GOLDSTEIN GOLUB KESSLER LLP
New York, New York

January 30, 2004

F-3

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CPI AEROSTRUCTURES, INC.

BALANCE SHEET

December 31, 2004

ASSETS
Current Assets:
Cash				$	1,756,350
Accounts receivable					1,641,002
Costs and estimated earnings in excess of billings on uncompleted contracts					26,030,507
Prepaid expenses and other current assets					182,003
Total current assets					29,609,862
Property, Plant and Equipment, net					882,758
Other Assets					266,504
Total Assets				$	30,759,124
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable				$	4,332,255
Accrued expenses					525,061
Current portion of long-term debt					83,144
Deferred income taxes					144,000
Income taxes payable					129,000
Total current liabilities					5,213,460
Long-term debt, net of current portion					129,276
Total Liabilities					5,342,736
Commitments and Contingencies
Shareholders' Equity:
Common stock - $.001 par value; authorized 50,000,000 shares, 5,443,415 shares issued and 5,412,400 shares outstanding					5,443
Additional paid-in capital					22,541,716
Retained earnings					3,190,085
Treasury stock					(320,856	)
Total Shareholders' Equity					25,416,388
Total Liabilities and Shareholders' Equity				$	30,759,124

See Notes to Financial Statements

F-4

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CPI AEROSTRUCTURES, INC.

STATEMENTS OF INCOME

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

See Notes to Financial Statements

F-5

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CPI AEROSTRUCTURES, INC.

STATEMENT OF SHAREHOLDERS' EQUITY

Years ended December 31, 2004 and 2003

				Common Shares				Amount				Additional Paid-in Capital				(Accumulated Deficit)/Retained Earnings				Treasury Stock				Shareholders' Equity
Balance at January 1, 2003					2,785,668			$	2,786			$	12,613,974			$	(10,279,224	)			—			$	2,337,536
Net income					—				—				—				8,393,278				—				8,393,278
Amortization of fair value of warrants issued in conjunction with consulting agreement					—				—				105,354				—				—				105,354
Common stock issued in secondary public offering					2,300,000				2,300				7,756,790				—				—				7,759,090
Common stock issued for bank fees					20,000				20				88,669				—				—				88,689
Common stock issued upon exercise of options and warrants					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
Net income					—				—				—				5,076,031				—				5,076,031
Common stock issued upon exercise of options and warrants					138,120				138				371,319				—				—				371,457
Treasury stock					—				—				—				—			$	(320,856	)			(320,856	)
Common stock issued as employee compensation					3,525				3				35,950				—				—				35,953
Tax benefits from stock option plans					—				—				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

See Notes to Financial Statements

F-6

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CPI AEROSTRUCTURES, INC.

STATEMENTS OF CASH FLOWS

Year ended December 31,				2004				2003
Cash flows from operating activities:
Net income before operations of discontinued segment				$	5,076,031			$	7,932,043
Adjustments to reconcile net income before operations of discontinued segment to net cash used in operating activities:
Depreciation and amortization					184,355				131,204
Warrants issued for consulting fees					—				105,354
Common stock issued for bank fees and employee compensation					35,953				88,689
Gain on early extinguishment of debt					—				(2,431,233	)
Deferred portion of provision/(benefit) for income taxes					1,202,000				(407,000	)
Tax benefit for stock options					421,000				415,000
Changes in operating assets and liabilities:
Decrease in accounts receivable					106,822				583,951
Increase in costs and estimated earnings in excess of billings on uncompleted contracts					(8,580,620	)			(6,067,781	)
Decrease in prepaid expenses and other current assets					167,326				116,169
Increase in other assets					(87,278	)			—
Increase (decrease) in accounts payable and accrued expenses					971,643				(1,317,185	)
Increase (decrease) in income taxes payable					(58,000	)			187,000
Net cash used in operating activities					(560,768	)			(663,789	)
Cash flows from investing activity- Purchase of property, plant and equipment					(667,684	)			(268,790	)
Net cash used in investing activity					(667,684	)			(268,790	)
Cash flows from financing activities:
Proceeds from exercise of stock options					50,601				733,856
Proceeds from long-term debt					170,000				—
Payment of long-term debt					(30,109	)			(5,599,505	)
Proceeds from public offering					—				7,759,090
Net cash provided by financing activities					190,492				2,893,441
Net cash provided by (used in) continuing operations					(1,037,960	)			1,960,862
Net cash provided by discontinued operations					—				741,911
Net increase (decrease) in cash					(1,037,960	)			2,702,773
Cash at beginning of year					2,794,310				91,537
Cash at end of year				$	1,756,350			$	2,794,310
Supplemental schedule of noncash investing and financing activity:
Property, plant and equipment acquired through capital lease				$	38,915				—
Stock options proceeds paid through Company's stock				$	320,856				—
Supplemental schedule of cash flow information:
Cash paid during the year for interest				$	8,109			$	148,006
Cash paid for income taxes:				$	199,500				—

See Notes to Financial Statements

F-7

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

1.				PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:				CPI Aerostructures, Inc.'s ("CPI" or the "Company") operations consist of the design and production of complex aerospace structural subassemblies under U.S. government and commercial contracts. The length of the Company's contracts varies but is typically between one and two years for U.S. government contracts and up to 10 years for commercial contracts.
								CPI's revenue is recognized based on the percentage of completion method of accounting for its contracts measured by the percentage of total costs incurred to date to estimated total costs at completion for each contract. Contract costs include all direct material, labor costs, tooling and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Selling, general and administrative costs are charged to expense as incurred. Estimated losses on uncompleted contracts are recognized in the period in which such losses are determined. Changes in job performance may result in revisions to costs and income and are recognized in the period in which revisions are determined to be required. The percentage of completion method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods and, as a result, there can be a significant disparity between earnings (both for accounting and taxes) as reported and actual cash received by us during any reporting period. In accordance with industry practice, costs and estimated earnings in excess of billings on uncompleted contracts, included in the accompanying balance sheet, contain amounts relating to contracts and programs with long production cycles, a portion of which will not be realized within one year. CPI's recorded revenue may be adjusted in later periods in the event that CPI's cost estimates prove to be inaccurate or a contract is terminated.
								The Company maintains cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash.
								Accounts receivable are reported at their outstanding unpaid principal balances. The Company writes off accounts when they are deemed to be uncollectible. The Company has experienced insignificant amounts of bad debts in such accounts.
								Depreciation and amortization of property, plant and equipment is provided by the straight-line method over the estimated useful lives of the respective assets or the life of the lease, for leasehold improvements.
								The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates by management. Actual results could differ from these estimates.

F-8

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

								The Company reviews its long-lived assets and certain related intangibles for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. As a result of its review, the Company does not believe that any such change has occurred. If such changes in circumstance are present, a loss is recognized to the extent the carrying value of the asset is in excess of the sum of the undiscounted cash flows expected to result from the use of the asset and amounts expected to be realized upon its eventual disposition.
								The fair value of the Company's short-term debt is estimated based on the current rates offered to the Company for debt of similar terms and maturities. Using this method, the fair value of the Company's short-term debt was not significantly different than the stated value at December 31, 2004.
								The Company incurred freight and delivery costs of approximately $178,000 and $176,000, respectively, during the years ended December 31, 2004 and 2003. These costs are included in cost of sales.
								Basic earnings per common share is computed using the weighted-average number of shares outstanding. Diluted earnings per common share is computed using the weighted-average number of shares outstanding adjusted for the incremental shares attributed to outstanding options and warrants to purchase common stock. Incremental shares of 727,479 and 510,011 were used in the calculation of diluted earnings per common share in 2004 and 2003, respectively. Incremental shares of 75,000 were not included in the diluted earnings per share calculations at December 31, 2004 as their exercise price was in excess of the Company's stock price at December 31, 2004 and, accordingly, these shares are not assumed to be exercised for the diluted earnings per share calculation.
								The Company has elected to apply Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its stock options issued to employees (intrinsic value) and has adopted the disclosure-only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. Had the Company elected to recognize compensation cost based on the fair value of the options granted at the grant date as prescribed by SFAS No. 123, the Company's net income and income per common share would have been as follows:

F-9

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

Year ended December 31,				2004				2003
Net income – as reported				$	5,076,031			$	8,393,278
Deduct:    Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects					476,865				453,866
Net income – pro forma				$	4,599,166			$	7,939,412
Basic income per share – as reported				$	0.94			$	1.72
Basic income per share – pro forma				$	0.85			$	1.63
Diluted income per share – as reported				$	0.83			$	1.56
Diluted income per share – pro forma				$	0.75			$	1.48

The Company's assumptions used to calculate the fair values of options issued during 2004 were (i) risk-free interest rates of 2.74% 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 fair values of options issued were (i) risk-free interest rates of 2.10% and 2.78%, (ii) expected life of 10 years, (iii) expected volatility of 198%, and (iv) expected dividends of zero.

In December 2004, the FASB issued SFAS No. 123(R) (revised 2004), "Share-Based Payment", which amends FASB Statement No. 123 and will be effective for public companies for interim or annual periods beginning after June 15, 2005. The new standard will require us to expense employee stock options and other share-based payments. The FASB believes the use of a binomial lattice model for option valuation is capable of more fully reflecting certain characteristics of employee share options compared to the Black-Scholes options pricing model. The new standard may be adopted in one of three ways — the modified prospective transition method, a variation of the modified prospective transition method or the modified retrospective transition method. We are currently evaluating how we will adopt the standard and evaluating the effect that the adoption of SFAS 123(R) will have on our financial position and results of operations.

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4. This statement amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4, previously stated that ". . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges . . ." SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS 151 shall be applied prospectively and are effective for inventory costs incurred during fiscal years beginning after

F-10

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

June 15, 2005, with earlier application permitted for inventory costs incurred during fiscal years beginning after the date this Statement was issued. The adoption of SFAS No. 151 is not expected to have a material impact on our financial position and results of operations.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a material impact on our financial position and results of operations.

2.				COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS:				At December 31, 2004, costs and estimated earnings in excess of billings on uncompleted contracts (unbilled) consist of:

				U.S. Government				Commercial				Total
Costs incurred on uncompleted contracts				$	32,764,584			$	13,373,694			$	46,138,278
Estimated earnings					20,351,259				6,187,927				26,539,186
					53,115,843				19,561,621				72,677,464
Less billings to date					28,746,944				17,900,013				46,646,957
Costs and estimated earnings in excess of billings on uncompleted contracts				$	24,368,899			$	1,661,608			$	26,030,507

Unbilled costs and estimated earnings are billed in accordance with applicable contract terms. As of December 31, 2004, $ 1,243,000 of the balances above, primarily commercial contracts, are not expected to be collected within one year. Amounts not paid or billed under retainage provisions are not material.

F-11

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

3.				ACCOUNTS RECEIVABLE:				At December 31, 2004, accounts receivable consists of trade receivables as follows:

Billed receivables				$1,540,504
Unbilled receivables on completed contracts				100,498
				$1,641,002

4.				PROPERTY, PLANT AND EQUIPMENT:				Property, plant and equipment, at cost, consists of the following:

December 31, 2004								Estimated Useful Life
Machinery and equipment				$    522,095				5 to 10 years
Computer equipment				547,975				5 years
Furniture and fixtures				124,615				7 years
Automobiles and trucks				23,488				5 years
Leasehold improvements				483,213				10 years
				1,701,386
Less accumulated depreciation and amortization				818,628
				$    882,758

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

5.				RELATED PARTY TRANSACTIONS:				In October 2000, the Company adopted a Greit Plan for the purpose of offering senior management a deferred compensation death benefit plan (the "Plan") that provides a tax-free benefit and which is tax-neutral to the Company. Pursuant to the Plan, the Company made a noninterest-bearing loan to an employee in the amount of $150,000, which was used to purchase the Plan. The Plan has since been terminated. The surrender value has been returned to the employee who has placed the proceeds from the surrender value in an annuity, which will mature to $150,000. Simultaneously, the employee purchased an insurance policy in the amount of $150,000, of which the Company is the sole beneficiary. The loan to the employee will be repaid to the Company upon the maturity date of the annuity or upon the death of the employee, whichever occurs first.

F-12

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

6.				DISCONTINUED OPERATIONS:				On January 22, 2002, the Company announced a decision made by the board of directors as of December 31, 2001 to close the Kolar facilities located in Ithaca, New York, and liquidate its assets through a public auction of its machinery and equipment and the private sale of its real estate. On February 21, 2002, Kolar sold a substantial portion of its machinery and equipment at an auction conducted by Daley-Hodkin Corporation at Kolar's main facility in Ithaca, New York. In connection with the discontinuance of Kolar's operations, the Company incurred a one-time charge of $10,422,816 related to the write-off of Kolar's assets, net of expected proceeds, and an accrual for estimated losses during the phase-out period. The disposition of Kolar's operations represents a disposal of a business segment under APB Opinion No. 30 in 2001. Accordingly, results of the operation have been classified as discontinued. On July 2, 2003, Kolar's corporate entity was merged into the Company. For business segment reporting purposes, Kolar's business results were previously classified as the "Machining" segment. In 2003, the Company sold the remaining assets for Kolar and recorded a gain of $461,235.
7.				LONG TERM DEBT AND CREDIT FACILITY:				Long term debt includes capital leases which expire during 2007. The leases require monthly payments of principal and interest, imputed at an interest rate of 5% and 9% per annum.

Future minimum lease payments under long-term debt are as follows:

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

On January 28, 2003, the Company sold one of the two remaining Kolar buildings and related land for $585,000 and on May 7, 2003, the final building and related land was sold for $190,000. The proceeds were used to repay bank loans.

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

In September 2003, the Company entered into a three year, $5.0 million revolving credit facility with JP Morgan Chase Bank, secured by the assets

F-13

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

of the Company. The facility specifies interest rates that range between the Prime Rate and 225 basis points over LIBOR, depending on certain terms and conditions. As of December 31, 2004, the Company has not borrowed any funds pursuant to this facility.

8.				COMMITMENTS:				The Company has employment agreements with six employees. The aggregate future commitment under these agreements is as follows:

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

These agreements provide for additional bonus payments that are calculated as defined.

The Company leases an office and warehouse facility under a non-cancelable operating lease which expires in December 2014. The aggregate future commitment under this agreement is as 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.    INCOME TAXES:	The provision for income taxes consists of the following:

Years ended December 31,				2004				2003
Current:
Federal				$   572,000				$   593,000
State and local				20,000				$       9,000
Deferred:
Federal				1,202,000				(407,000)
				$1,794,000				$   195,000

F-14

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

The difference between the income tax provision computed at the federal statutory rate and the actual tax provision is accounted for as follows:

December 31,				2004				2003
Taxes computed at the federal statutory rate				$2,336,000				$  2,920,000
Utilization of net operating loss carryforward				(542,000)				(2,725,000)
				$1,794,000				$     195,000

The components of deferred income tax liabilities at December 31, 2004 are as follows:

State net operating loss carryforwards				$	204,000
Temporary differences					(348,000	)
				$	(144,000	)

As of December 31, 2004, the Company had net operating loss carryforwards of approximately $4,647,000 for state income tax purposes expiring through 2022.

During 2004, the Company reversed approximately $850,000 of valuation allowance, which was reducing the deferred tax asset related to the Company's net operating loss carryforwards to an amount that the Company deemed more likely than not to be realized. The Company has no valuation allowance at December 31, 2004.

The Company recognized, for income tax purposes, a tax benefit of $421,000 and $415,000, for the years ended December 31, 2004 and 2003, respectively, for compensation expense related to its stock option plan for which no corresponding charge to operations has been recorded. Such amounts have been added to additional paid-in capital 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 83,334 common shares are reserved for issuance, 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 options may not be exercised more than five years from the date of issuance. No more options may be granted under the 1992 plan.

In 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan"), as amended, for which 200,000 common shares are reserved for issuance. The 1995 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 options' exercise price is equal to the closing price of the Company's shares on the day of issuance, except for incentive stock options granted to the Company's president, which are exercisable at 110% of the closing price of the Company's shares on the date of issuance.

F-15

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

In 1998, the Company adopted the 1998 Stock Option Plan (the "1998 Plan"). The 1998 Plan, as amended, reserved 463,334 common shares for issuance. The 1998 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 options' exercise price is equal to the closing price of the Company's shares on the day of issuance, except for incentive stock options granted to the Company's president, which are exercisable at 110% of the closing price of the Company's shares on the date of issuance.

In 2000, the Company adopted the 2000 Stock Option Plan (the "2000 Plan"). The 2000 Plan, as amended, reserved 830,000 common shares for issuance. The 2000 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 options' exercise price is equal to the closing price of the Company's shares on the day of issuance, except for incentive stock options granted to the Company's president, which are exercisable at 110% of the closing price of the Company's shares on the date of issuance.

The Company has 23,810 options available for grant under the 1995 Plan, 10,666 options available for grant under the 1998 Plan, and 50,000 options available for grant under the 2000 Plan.

A summary of the status of the Company's four stock option plans as of December 31, 2004 and 2003 and changes during those years is as follows:

				2004								2003
Fixed Options				Options				Weighted- average Exercise Price				Options				Weighted- average Exercise Price
Outstanding and exercisable at beginning of year					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 of year					1,074,752			4.53					1,114,752			$  3.84
Weighted-average fair value of options granted								$    5.66								$  6.22

F-16

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CPI AEROSTRUCTURES, INC.
    
NOTES TO FINANCIAL STATEMENTS
December 31, 2004

The following table summarizes information about stock options outstanding and exercisable at December 31, 2004:

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

11.				WARRANTS AND OPTIONS:				In February 2002, the Company issued 5,000 options to a consultant as compensation related to a one-year consulting agreement. The options are exercisable at $1.65 per share through February 2007. The options are valued at $113,183, of which $105,354 has been charged to operations in 2003, based on the Company's assumptions as follows: (i) risk-free interest rate of 5.12%, (ii) expected life of five years, (iii) expected volatility of 84.95%, and (iv) expected dividends of zero. The warrants are accounted for in accordance with EITF 96-18, Accounting for Equity Interests that are Issued to Other Than Employees, or in Conjunction with Selling, Goods or Services.
								In February 2003, the Company issued to an underwriter (and its designees) warrants to purchase an aggregate of 200,000 shares of the Company's common stock as compensation related to the Company's public offering. The warrants are exercisable, in whole or in part, at $4.40 per share from February 2004 through February 2008. At December 31, 2004, warrants to purchase 195,000 shares remain outstanding.
12.				EMPLOYEE BENEFIT PLAN:				On September 11, 1996, CPI's board of directors instituted a defined contribution plan under Section 401(k) of the Internal Revenue Code (the "Code"). On October 1, 1998, the Company amended and standardized both the CPI and Kolar plans as required by the Code. Pursuant to the amended plan, qualified employees may contribute a percentage of their pretax eligible compensation to the Plan and the Company will match a percentage of each employee's contribution. Additionally, the Company has a profit-sharing plan covering all eligible employees. Contributions by the Company are at the discretion of management. The amount of contributions recorded by the Company in 2004 and 2003 amounted to $108,706 and $81,310, respectively.
13.				MAJOR CUSTOMER:				99% of the sales in 2004 and 98% of the sales in 2003 were to the U.S. government.
14.				PUBLIC OFFERING:				On February 19, 2003, the Company consummated a public offering of 2,300,000 common shares at a price of $4.00 per share raising proceeds of $7,700,000, net of offering expenses.

F-17

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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

				CPI AEROSTRUCTURES, INC.
				(Registrant)
Dated: March 30, 2005				By:					/s/ Edward J. Fred
				Edward J. Fred Chief Executive Officer, President, Secretary and Director

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature		Title		Date
/s/ Eric Rosenfeld		Chairman of the Board of Directors		March 30, 2005
Eric Rosenfeld
/s/ Edward J. Fred		Chief Executive Officer, President, Secretary and Director		March 30, 2005
Edward J. Fred
/s/ Arthur August		Chairman Emeritus		March 30, 2005
Arthur August
/s/ Vincent Palazzolo		Chief Financial Officer		March 30, 2005
Vincent Palazzolo
/s/ Walter Paulick		Director		March 30, 2005
Walter Paulick
/s/ Kenneth McSweeney		Director		March 30, 2005
Kenneth McSweeney
/s/ A.C. Providenti		Director		March 30, 2005
A.C. Providenti

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