Cpi Aerostructures (CVU) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We depend on government contracts for a significant portion of our revenues
2. 02We face risks relating to government contracts
3. 03We have risks associated with competing in the bidding process for contracts
4. 04Further consolidation in the aerospace industry could adversely affect our business and financial results
5. 05We depend upon a select base of large prime defense contractors for the majority of our revenue, which subjects us to unique risks which may adversely affect us
6. 06We are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expenses in the event of non-compliance
7. 07We may be subject to fines and disqualification for non-compliance with Federal Aviation Administration (“FAA”) regulations
8. 08If our subcontractors or suppliers fail to perform their contractual obligations, our contract performance, and our ability to obtain future business and our profitability could be materially and adversely impacted
9. 09Due to fixed contract pricing, increasing contract costs exposes us to reduced profitability and the potential loss of future business
10. 10We use estimates when accounting for contracts. Changes in estimates may affect our profitability and our overall financial position
11. 11We may be unable to attract and retain personnel who are key to our operations
12. 12We are subject to intense competition for the skilled technicians necessary to manufacture our products
13. 13We are subject to the cyclical nature of the commercial aerospace industry, and any future downturn in the commercial aerospace industry or general economic conditions, including inflation could adversely impact the demand for our products
14. 14Our working capital requirements may negatively affect our liquidity and capital resources
15. 15We incur risks associated with new programs
16. 16We are presently classified as a small business and the loss of our small business status may adversely affect our ability to compete for government contracts
17. 17Cyber security attacks, internal system or service failures and technological changes, including the use of machine learning and generative artificial intelligence, may adversely impact our business and operations
18. 18Our ability to utilize our tax benefits could be substantially limited if we fail to generate sufficient income or if we experience an “ownership change”
19. 19Product liability claims in excess of insurance could adversely affect our financial results and financial condition
20. 20Increased scrutiny from investors, lenders, regulators and other market participants regarding our environmental, social, governance, sustainability or climate responsibilities could expose us to additional costs and adversely impact our liquidity, results of operations, reputation, employee retention, and stock price

Risks Related to Our Indebtedness and Liquidity

1. 21In the past, CPI obtained amendments to and received waivers of and consents to non-compliance with certain covenants under our credit facility with BankUnited and there can be no assurance that we will not fall out of compliance with our covenants in the future
2. 22Our capital requirements, liquidity and financial condition raise significant risks as to our ability to continue as a going concern
3. 23Our cost of borrowing under the Credit Agreement is based on the Prime Rate of interest per annum published in the Money Rates section of The Wall Street Journal (the “Prime Rate”) plus the margin charged by our lender, and increases in the Prime Rate negatively impact our profitability

Risks Related to Global Events

1. 24The conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist acts and acts of war may seriously harm our business, results of operations and financial condition
2. 25We cannot predict the consequences of future geo-political events on our operations or our profitability