-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 EvFJY8JpIgUq+QU9YE8bcFziMMm3JCbIp+NSeEu1RrHupcZ4F368qPSn0IPlHLZp
 z0l9rOBcUeZZ8GKbW65Q0w==

<SEC-DOCUMENT>0001094891-01-500361.txt : 20020410
<SEC-HEADER>0001094891-01-500361.hdr.sgml : 20020410
ACCESSION NUMBER:		0001094891-01-500361
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20010930
FILED AS OF DATE:		20011114

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CPI AEROSTRUCTURES INC
		CENTRAL INDEX KEY:			0000889348
		STANDARD INDUSTRIAL CLASSIFICATION:	AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728]
		IRS NUMBER:				112520310
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11398
		FILM NUMBER:		1786899

	BUSINESS ADDRESS:	
		STREET 1:		200A EXECUTIVE DR
		CITY:			EDGEWOOD
		STATE:			NY
		ZIP:			11717
		BUSINESS PHONE:		5165865200
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>cpi_10qsb-93001.txt
<DESCRIPTION>10QSB FOR 9-30-01
<TEXT>


                                                       CPI AEROSTRUCTURES, INC.

- -------------------------------------------------------------------------------



                       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 September 30, 2001



                            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 (631) 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 2,657,046 as of September 30, 2001.


<PAGE>


                                                        CPI AEROSTRUCTURES, INC.

                                                                          INDEX
- -------------------------------------------------------------------------------





Part I Financial Information:


Item 1 - Consolidated Financial Statements:

       Independent Accountant's Review Report                               3

       Balance Sheets as of September 30, 2001 (Unaudited) and              4
         December 31, 2000 (Audited)

       Statements of Operations for the Three Months and Nine Months        5
         ended September 30, 2001 (Unaudited) and 2000 (Unaudited)

       Statements of Cash Flows for the Nine Months ended                   6
         September 30, 2001 (Unaudited) and 2000 (Unaudited)

       Notes to Financial Statements (Unaudited)                            7

Item 2 - Management's Discussion and Analysis of Financial Condition        10
            and Results of Operations

Part II.  Other Information

          Item 2 - Changes in Securities and Use of Proceeds                11

          Item 4 - Submission of Matters to a Vote of Security Holders      11

          Item 6 - Exhibits and Reports on Form 8-K                         12


        Signatures                                                          13











                                                                               2



<PAGE>






PART I   Financial Information


ITEM 1.  Consolidated Financial Statements



ACCOUNTANT'S REVIEW REPORT



To the Board of Directors
CPI Aerostructures, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of CPI
Aerostructures, Inc. and Subsidiary as of September 30, 2001 and the related
condensed consolidated statements of operations for the nine and three month
periods ended September 30, 2001 and 2000 and the consolidated statements of
cash flows for the nine month periods ended September 30, 2001 and 2000. These
financial statements are responsibility of the company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
condensed financial statements taken as a whole. Accordingly, we do not express
such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.


/s/ Goldstein Golub Kessler LLP

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

November 2, 2001













                                                                               3

<PAGE>

<TABLE>
<CAPTION>

                                                                                     CPI AEROSTRUCTURES, INC.

                                                                                  CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------------

                                                                               September 30,     December 31,
                                                                                    2001            2000
                                                                                (Unaudited)       (Audited)
- -------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                                     $  275,352         $  172,184
  Accounts receivable                                                            1,624,498          2,107,555
  Costs and estimated earnings in excess of billings on uncompleted
      contracts                                                                  6,664,340          4,403,779
  Inventory                                                                      2,945,122          4,984,682
  Deferred income taxes net of valuation allowance of $1,146,000                 1,214,000          1,214,000
  Prepaid expenses and other current assets                                        164,182            114,333
- -------------------------------------------------------------------------------------------------------------

      Total current assets                                                      12,887,494         12,996,533

Property, Plant and Equipment, net                                               5,483,004          6,142,330
Goodwill                                                                         5,679,011          6,066,258
Other Assets                                                                       212,564            308,579
- -------------------------------------------------------------------------------------------------------------
      Total Assets                                                             $24,262,073        $25,513,700
=============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable                                                             $ 2,792,282       $  2,663,300
  Accrued expenses                                                                 400,662            560,444
  Line of credit                                                                 1,700,000          1,700,000
  Current portion of long term debt                                              3,145,118          6,043,239
  Income taxes payable                                                                 ---             34,000
  Interest payable                                                                 596,010             10,720

- -------------------------------------------------------------------------------------------------------------
      Total current liabilities                                                  8,634,072         11,011,703

Long term debt                                                                   6,084,106          4,460,003
Deferred income taxes                                                              431,000            431,000
Interest payable                                                                       ---            374,400
- -------------------------------------------------------------------------------------------------------------
      Total liabilities                                                         15,149,178         16,277,106
- -------------------------------------------------------------------------------------------------------------

Commitments
 Shareholders' Equity:
  Common stock - $.001 par value; authorized 50,000,000 shares,
   2,657,046 and 2,648,509, respectively, issued and outstanding                     2,657              2,649
   Additional paid - in capital                                                 12,367,020         12,319,674
   Accumulated deficit                                                          (3,256,782)        (3,085,729)
- -------------------------------------------------------------------------------------------------------------
      Shareholders' equity                                                       9,112,895          9,236,594
- -------------------------------------------------------------------------------------------------------------
      Total Liabilities and Shareholders' Equity                               $24,262,073        $25,513,700
=============================================================================================================
                                                               See Notes to Consolidated Financial Statements
                                                                                                            4
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                                                            CPI AEROSTRUCTURES, INC.

                                                                               CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
                                          For the Three Months Ended Sept. 30,   For the Nine Months Ended Sept. 30,

                                                          2001           2000                 2001            2000
                                                              (Unaudited)                         (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>                 <C>              <C>
Revenue                                            $ 7,149,818    $ 7,976,254         $ 17,447,446     $22,275,083

Cost of sales                                        5,417,850      5,891,425           14,045,381      16,630,570
- -------------------------------------------------------------------------------------------------------------------

Gross profit                                         1,713,968      2,084,829            3,402,065       5,644,513
Selling, general and administrative expenses           889,842      1,120,468            2,762,352       3,066,691
- ------------------------------------------------------------------------------------------------------------------

Income (loss) from operations                          842,126        964,361              639,713       2,577,822
- ------------------------------------------------------------------------------------------------------------------

Other (income) expense:
  Interest/other (income) expense                       31,196        (39,849)              10,114          90,773
  Interest expense                                     258,796        285,466              800,652         829,487
- ------------------------------------------------------------------------------------------------------------------

Total other expenses, net                              289,992        245,617              810,766         920,260
- ------------------------------------------------------------------------------------------------------------------

Income (loss) before provision for
  income taxes                                         552,134        718,744             (171,053)      1,657,562

Provision for income taxes                                 -0-        287,000                  -0-         663,000
- ------------------------------------------------------------------------------------------------------------------

Net income (loss)                                 $    552,134     $  431,744         $   (171,053)     $  994,562

- ------------------------------------------------------------------------------------------------------------------

Earnings (loss) per common share - Basic          $        .21     $      .16         $       (.06)     $      .38
- ------------------------------------------------------------------------------------------------------------------

Earnings (loss) per common share - Diluted        $        .21     $      .16         $       (.06)     $      .36
- -------------------------------------------------------------------------------------------------------------------

Shares used in computing earnings per
  Common share:
     Basic                                           2,657,046      2,648,509            2,652,356       2,648,509
     Diluted                                         2,690,380      2,765,223            2,738,467       2,753,467

===================================================================================================================







                                                                    See Notes to Consolidated Financial Statements
                                                                                                                 5
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                                                                            CPI AEROSTRUCTURES, INC.

                                                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------------------

For the Nine Months Ended September 30,                                                         2001             2000
                                                                                                     (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                <C>
Cash flows from operating activities:
  Net income (loss)                                                                      $ (171,053)        $  994,562
  Adjustments to reconcile net income to net cash used in
   operating activities:
    Depreciation and amortization                                                         1,364,382          1,232,256
    Loss (gain) on disposal of fixed assets                                                   7,875                481
    Changes in operating assets and liabilities:
      Decrease in accounts receivable                                                       483,057             55,588
      (Increase) decrease in prepaid expenses and other current assets                      (49,849)           102,923
      Decrease in other assets                                                               (1,000)            79,741
      Increase in costs and estimated earnings in excess of billings on
       uncompleted contracts                                                             (2,260,561)          (734,182)
      (Increase) decrease in inventory                                                    2,039,560         (1,202,862)
      (Decrease) increase in accounts payable                                               128,982            (24,297)
      (Decrease) increase in accrued expenses                                                51,108            (42,982)
      (Decrease) increase in income taxes payable                                           (34,000)           657,100
- ----------------------------------------------------------------------------------------------------------------------
          Net cash provided by in operating activities                                    1,558,501          1,118,328
- ----------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
Purchase of property and equipment                                                          (40,957)          (252,592)
Proceeds from sale of fixed assets                                                            3,550              9,098
- ----------------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                                             (37,407)          (243,494)
- ----------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Repayment of long-term debt                                                            (1,417,926)        (2,082,675)
  Proceeds from line of credit                                                               ------          1,325,000
- ----------------------------------------------------------------------------------------------------------------------
              Net cash used in financing activities                                      (1,417,926)          (757,675)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in cash                                                                        103,168            117,159
Cash at beginning of period                                                                 172,184            295,698
- ----------------------------------------------------------------------------------------------------------------------
Cash at end of period                                                                       275,352        $   412,857
======================================================================================================================

Supplemental disclosures of cash flow information:

  Cash paid during the period for:
    Interest                                                                                589,762        $   829,487
======================================================================================================================
    Income taxes                                                                         $   36,050        $    12,645
======================================================================================================================


Supplemental schedule of non-cash financing activity:

  Financing obligation incurred in connection with
    the acquisition of equipment                                                          $ 143,908        $   530,938

======================================================================================================================


                                                                        See Notes to Consolidated Financial Statements
                                                                                                                     6
</TABLE>


<PAGE>
                                                        CPI AEROSTRUCTURES, INC.

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

1.    INTERIM       The  financial  statements  as of  September  30,  2001 and
      FINANCIAL     for the nine months ended September 30, 2001 and 2000 are
      STATEMENTS    unaudited, however, 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 and are not necessarily indicative of
                    the results to be obtained for a full year.

                    In July 2001, the Financial Accounting Standards Board
                    issued Statement of Financial Accounting Standards No. 141,
                    "Business Combinations" (SFAS No. 141) and Statement of
                    Financial Accounting Standards No. 142, "Goodwill and Other
                    Intangible Assets" (SFAS No. 142).

                    SFAS No. 141 addresses financial accounting and reporting
                    for business combinations. This statement requires the
                    purchase method of accounting to be used for all business
                    combinations, and prohibits the pooling-of-interests method
                    of accounting. This statement is effective for all business
                    combinations initiated after June 30, 2001 and supercedes
                    APB Opinion No. 16, "Business Combinations" as well as FASB
                    Statement of Financial Accounting Standards No. 38,
                    "Accounting for Preacquisition Contingencies of Purchased
                    Enterprises".

                    SFAS No. 142 addresses how intangible assets that are
                    acquired individually or with a group of other assets should
                    be accounted for in financial statements upon their
                    acquisition. This statement requires goodwill to be
                    periodically reviewed for impairment rather than amortized,
                    beginning on January 1, 2002. SFAS No. 142 supercedes APB
                    Opinion No. 17, "Intangible Assets".

                    The Company is assessing the impact of adopting these
                    standards on the consolidated financial statements.















                                                                               7
<PAGE>

<TABLE>
<CAPTION>
                                                                                             CPI AEROSTRUCTURES, INC.

                                                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

- -----------------------------------------------------------------------------------------------------------------------

2.    COSTS AND               Costs and estimated earnings in excess of billings on uncompleted contracts consist of:
      ESTIMATED
      EARNINGS IN                                                                   September 30, 2001
      EXCESS OF               -----------------------------------------------------------------------------------------
      BILLINGS ON
      UNCOMPLETED                                                       U.S.
      CONTRACTS:                                                      Government         Commercial           Total
                              -----------------------------------------------------------------------------------------
<S>                          <C>                                     <C>                <C>               <C>
                              Costs incurred on uncompleted
                               contracts                              $5,076,743        $12,346,327        $17,423,070
                              Estimated earnings                       1,871,938          7,227,530          9,099,468
                              -----------------------------------------------------------------------------------------

                                                                       6,948,681         19,573,857         26,522,538
                              Less billings to date                    3,698,907         16,159,291         19,858,198

                              ----------------------------------------------------------------------------------------
                              Costs and estimated earnings
                               in excess of billings on
                               uncompleted contracts                  $3,249,774         $3,414,566         $6,664,340
                              ========================================================================================



                                                                                     December 31, 2000
                              ----------------------------------------------------------------------------------------

                                                                        U.S.
                                                                     Government         Commercial           Total
                              ----------------------------------------------------------------------------------------

                              Costs incurred on uncompleted
                               contracts                              $2,920,896        $11,718,432        $14,639,328
                              Estimated earnings                         909,009          6,227,850          7,136,859
                              ----------------------------------------------------------------------------------------

                                                                       3,829,905         17,946,282         21,776,187
                              Less billings to date                    2,156,866         15,215,542         17,372,408

                              ----------------------------------------------------------------------------------------
                              Costs and estimated earnings
                               in excess of billings on
                               uncompleted contracts                  $1,673,039        $ 2,730,740        $ 4,403,779
                              ========================================================================================





                                                                                                                     8
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                                             CPI AEROSTRUCTURES, INC.

                                                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------
<S>     <C>                    <C>                                               <C>              <C>

 3.    EARNINGS PER COMMON    Basic  earnings  per share is computed by dividing net income,  by the weighted  average
       SHARE:                 number of common shares outstanding.

                              Diluted earnings per share is 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.

                              The convertible securities attributable to a note payable have been excluded from the
                              fully diluted computation as their effect would be antidilutive.


 4.       INVENTORY:          Inventory consists of the following:
                                                                                     Sept. 30, 2001     Dec. 31, 2000
                                                                                     --------------     -------------

                              Raw Materials                                           $    787,301       $ 1,665,275
                              Work-in-Progress                                           1,386,890           672,979
                              Finished Goods                                               770,931         2,646,428
                              ----------------------------------------------------------------------------------------
                                                                                       $ 2,945,122         $ 4,984,682
                              ========================================================================================

 5.    SEGMENT                The  Company's  operations  are  classified  into two business  segments:  Production of
       INFORMATION:           complex aerospace structural sub-assemblies ("Aerospace") and computer numerical control
                              machining of metal products ("Machining").

                              Summarized financial information by business segment for 2000 and 1999 are as follows:

                              For the nine months ended September 30,                          2001               2000
                              ----------------------------------------------------------------------------------------

                              Net sales:
                                Aerospace                                             $  10,631,958       $  5,705,100
                                Machining                                                 6,815,488         16,569,983
                              ----------------------------------------------------------------------------------------
                                                                                        $17,447,446        $22,275,083
                              ========================================================================================

                              Operating income (loss):
                                Aerospace                                              $  2,470,358      $     530,185
                                Machining                                                (1,830,645)         2,047,637
                              ----------------------------------------------------------------------------------------
                                                                                       $    639,713       $  2,577,822
                              ========================================================================================

                              Total assets:
                                Aerospace                                             $   9,508,376       $  6,402,782
                                Machining                                                14,753,697         17,735,812
                              ----------------------------------------------------------------------------------------
                                                                                       $ 24,262,073       $ 24,138,594
                              ========================================================================================

                                                                                                                     9

</TABLE>

<Page>
                                                        CPI AEROSTRUCTURES, INC.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
- --------------------------------------------------------------------------------

Forward Looking Statements

The 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 reports filed with the Securities and Exchange Commission.

Material Changes in Results of Operations

The Company's revenue for the nine months ended September 30, 2001 was
$17,447,446 compared to $22,275,083 for the same period last year, representing
a decrease of $4,827,637 or 22%. This decrease is largely attributable to the
decrease in the demand for board handlers produced by Kolar.

Gross profit decreased by $2,242,448 or 40%, from the nine months ended
September 30, 2000 compared to the nine months ended September 30, 2001. Gross
profit as a percentage of revenue for the nine months ended September 30, 2001
was 20% compared to 25% for the same period last year. The reduction in gross
profit percentage is due primarily to a less profitable sales mix.

Selling, general, and administrative expenses decreased by $304,339, or 10%,
from the nine months ended September 30, 2000 compared to the nine months ended
September 30, 2001. Interest expense decreased by $28,835 for the nine months
ended September 30, 2001, compared to the same period last year.

Other expense decreased by $80,659 over last year's other expense.

The resulting net loss for the nine months ended September 30, 2001 was $171,053
compared to net income of $994,562 for the same period last year. Basic loss per
share was $.06 on 2,652,356 average shares outstanding, compared to $.38
earnings per share on 2,648,509 average shares outstanding for fiscal 2000.
Diluted loss per share was to $.06 per share compared to earnings of $.36 per
share in 2000 on 2,738,467 and 2,753,467 weighted average shares outstanding,
respectively.

Material Changes in Financial Condition

At September 30, 2001 and December 31, 2000, the Company had working capital of
$4,253,422 and $1,948,830 respectively, an increase of $2,268,592. This increase
is primarily attributable to the classification of approximately $1,819,000 of
long-term debt as current as of December 31, 2000. A large portion of the
Company's cash has been used for costs incurred on commercial and the numerous
government contracts which do not allow progress payments for contracts that are
in process. These costs are components of "costs and estimated earnings in
excess of billings on uncompleted contracts" and represent the aggregate costs
and related earnings for uncompleted contracts for which the customer has not
yet been billed. These costs and earnings are recovered upon shipment of
products and presentation of billings in accordance with contract terms. The
Company's continued requirement to incur significant costs, in advance of
receipt of associated cash for commercial and government aircraft contracts, has
caused an increase in the gap between aggregate costs and earnings and the
related billings to date.





                                                                             10

<PAGE>

                                                        CPI AEROSTRUCTURES, INC.

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
- --------------------------------------------------------------------------------

Net cash provided by operating activities for the nine months ended September
30, 2001 was $1,558,501 as compared to $1,118,328 for the nine months ended
September 30, 2000. This increase in cash was primarily the result of
depreciation and amortization of $1,364,382, a decrease in accounts receivable
of $483,057, an increase in accounts payable of $128,982, an increase in accrued
expenses of $51,108, and a decrease in inventory of $2,039,560, offset by an
increase in costs and estimated earnings in excess of billings on uncompleted
contracts of $2,260,561, an increase in prepaid expenses and other current
assets of $49,849, and a decrease in income taxes payable of $34,000.

PART II.          Other Information.

ITEM 2.  Changes In Securities and Use of Proceeds

         (c)      Recent Sales of Unregistered Securities

         During the three months ended September 30, 2001, the Company made the
following sales of unregistered securities:

<TABLE>
<CAPTION>
 ------------------ --------------------- --------------- --------------------- ------------------ ------------------
                                                             Consideration
                                                              Received and
                                                             Description of                           If Option,
                                                            Underwriting or                           Warrant or
                                                           Other Discounts to                         Convertible
                                                              Market Price       Exemption from     Security, Terms
                                           Number Sold        Afforded to         Registration      of Exercise or
 Date of Sale        Title of Security     Or Forfeited        Purchasers            Claimed          Conversions
 ------------------ --------------------- --------------- --------------------- ------------------ ------------------
<S>  <C>               <C>                  <C>           <C>                        <C>            <C>
     08/14/01           Common Stock         200,000      Option  to purchase        4(2)          Fully exercisable
                                                          common stock issued                      upon the date of
                                                          pursuant to the                          grant
                                                          Performance Equity
                                                          Plan 2000;  no cash
                                                          consideration
                                                          received by the
                                                          Company
 ------------------ --------------------- --------------- --------------------- ------------------ ------------------
</TABLE>


ITEM 4.     Submission of Matters to a Vote of Security Holders

            a)  An Annual Meeting of Shareholders was held on September 18, 2001
                ("Annual Meeting")

            b)  Two matters were voted upon at the Annual Meeting, as follows:

                1)     Arthur August and Edward J. Fred were re-elected to serve
                       as directors for the ensuing three years and until their
                       successors are elected and qualified with 2,122,148 votes
                       cast for each and 225,192 votes withholding authority for
                       their re-election.

                2)     The shareholders' voted for an increase in the number of
                       shares available for issuance under the Performance
                       Equity Plan 2000 from 700,000 to 830,000. The votes were
                       2,011,766 shares voted "For" the increase, 326,978 shares
                       voted "Against" the increase and 8,596 shares "Abstained"
                       from the vote.




                                                                           11


<PAGE>

                                                        CPI AEROSTRUCTURES, INC.

- --------------------------------------------------------------------------------


ITEM 6.      Exhibits and Reports on Form 8-K

             a)       Exhibits

                      10.35  Stock Option Agreement, between the Company and
                             Edward J. Fred, dated August 14, 2001 (1).

                      10.36  Stock Option Agreement, between the Company and
                             Arthur August, dated August 14, 2001 (2).

                      10.37  Employment Agreement, between the Company and
                             Edward J. Fred, dated August 14, 2001 (Filed
                             Herewith).

                      10.38  Employment Agreement, between the Company and
                             Arthur August, dated August 14, 2001 (Filed
                             Herewith).

                             (1)  Filed as an exhibit to the Schedule 13D of
                                  Edward J. Fred, filed with the Commission on
                                  October 19, 2001.

                            (2)   Filed as an exhibit to the Schedule 13D of
                                  Arthur August, filed with the Commission on
                                  October 19, 2001.

           b)         No reports on Form 8-K were filed with the Securities and
                      Exchange Commission during the nine months ended
                      September 30, 2001.










                                                                             12

<PAGE>




- -------------------------------------------------------------------------------


                                   SIGNATURES


         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                               CPI AEROSTRUCTURES, INC.



Dated:  November 14, 2001                      By:  /S/ Arthur August
                                                    -----------------
                                               Arthur August
                                               President
                                               (Principal Executive Officer)



Dated:  November 14, 2001                      By:  /S/ Edward J. Fred
                                                    ------------------
                                               Edward J. Fred
                                               Chief Financial Officer


























                                                                             13



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>3
<FILENAME>cpi_10qsb-exhib1037.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT FOR EDWARD J. FRED
<TEXT>

                                                                   Exhibit 10.37

                              EMPLOYMENT AGREEMENT

                  AGREEMENT dated August 14, 2001, between EDWARD J. FRED,
residing at 126 Brentwood Parkway, Brentwood, New York 11717 ("Executive"), and
CPI AEROSTRUCTURES, INC., a New York corporation having its principal office at
200A Executive Drive, Edgewood, New York 11717, ("Company");

                  WHEREAS, the Company desires to continue the employment of
Executive and Executive desires to continue his present employment with the
Company, pursuant to the terms and conditions herein set forth, superseding all
prior agreements between the Company, its subsidiaries and/or predecessors and
Executive;

                  IT IS AGREED:

         1.       Employment, Duties and Acceptance.
                  ---------------------------------

                  1.1    General. The Company shall continue to employ Executive
from August 14, 2001 until December 31, 2001 as its Chief Financial Officer
("CFO") and Executive Vice President and, from January 1, 2002 until December
31, 2004, as its President and CFO under the terms hereof. All of Executive's
powers and authority in any capacity shall at all times be subject to the
direction and control of the Company's Board of Directors. The Board may assign
to Executive such management and supervisory responsibilities and executive
duties for the Company or any subsidiary of the Company, including serving as an
executive officer and/or director of any subsidiary, as are consistent with
Executive's status as President, CFO and Executive Vice President, as the case
may be.

                  1.2    Full-Time Position. Executive accepts such employment
and agrees to devote substantially all of his business time, energies and
attention to the performance of his duties hereunder. Nothing herein shall be
construed as preventing Executive from making and supervising personal
investments, provided they will not interfere with the performance of
Executive's duties hereunder or violate the provisions of Section 6.4 hereof.





<Page>



                  1.3    Location. The Company will maintain its principal
executive offices within a 30 mile radius of its current location in Edgewood,
New York. Executive shall undertake such occasional travel, within or without
the United States, as is reasonably necessary in the interests of the Company.

                  1.4    Board of Directors Position. If, at any time during the
term hereof, that Executive is not serving as a director of the Company, he
shall nonetheless be invited to attend each meeting of the Board of Directors of
the Company.

         2.       Compensation and Benefits.
                  -------------------------

                  2.1    Salary. The Company shall pay to Executive a salary
("Base Salary") at the annual rate of not less than $150,000 from August 14,
2001 until December 31, 2001; at the annual rate of $200,000 from January 1,
2002 until December 31, 2002; at the annual rate of not less than $216,000 from
January 1, 2003 until December 31, 2003; and at the annual rate of $233,280 from
January 1, 2004 until December 31, 2004. Executive's compensation shall be paid
in equal, periodic installments in accordance with the Company's normal payroll
procedures.

                  2.2    Bonus. In addition to Base Salary, Executive shall be
paid a bonus ("Bonus") equal to 2% of the Company's consolidated net income for
the year ending December 31, 2001 and 2002; equal to 3% of the Company's
consolidated net income for the year ending December 31, 2003; and equal to 4%
of the Company's consolidated net income for the year ending December 31, 2004,
as determined by reference to the Company's audited financial statements for
such year. The amount of the Bonus shall be pro-rated to the date of termination
of Executive's employment. The Bonus with respect to any year shall be paid on
or prior to April 15 of the following year.

                  2.3    Additional Compensation. As additional compensation for
Executive entering into this Agreement and agreeing to be bound by its terms
(including Article 6 hereof) and for the services to be rendered by Executive
hereunder, the Company hereby issues to Executive options to purchase 100,000
shares of Common Stock under the Company's Performance Equity Plan 2000. These
options ("Agreement Options") shall be evidenced by one or more Stock Option
Agreements of even date herewith between the Company and Executive. The




                                        2

<Page>


Agreement Options will have an exercise price of $1.20 per share and will vest
immediately. The Compensation Committee may, in its discretion, grant additional
options to Executive during the term of this Agreement.

                  2.4    Benefits. Executive shall be entitled to such medical,
life, disability and other benefits as are generally afforded to other senior
executives of the Company, subject to applicable waiting periods and other
conditions.

                  2.5    Vacation. Executive shall be entitled to such paid
vacation days in each year during the Employment Term and to a reasonable number
of other days off for religious and personal reasons in accordance with
customary Company policy.

                  2.6    Automobile. The Company shall continue to lease a
luxury class automobile (reasonably satisfactory to Executive) for Executive
during the term of this Agreement to be used in connection with the business of
the Company. The Company shall reimburse Executive for all costs associated with
the use of a vehicle, including lease and insurance costs, repairs and
maintenance.

                  2.7    Expenses. The Company shall pay or reimburse Executive
for all transportation, hotel and other expenses reasonably incurred by
Executive on business trips (including business class air travel if the
scheduled flight is more than two (2) consecutive hours) and for all other
ordinary and reasonable out-of-pocket expenses actually incurred by him in the
conduct of the business of the Company against itemized vouchers submitted with
respect to any such expenses and approved in accordance with customary
procedures.

         3.       Term. The term of Executive's employment hereunder shall
commence as of August 14, 2001 and shall continue until December 31, 2004 (as it
may be extended, the "Employment Term"), unless sooner terminated as herein
provided. The Employment Term shall be automatically renewed for successive one
year periods unless terminated by the Company or Executive by written notice to
the other party at least thirty (30) days before the end of the Employment Term
or any renewal thereof.


                                        3


<Page>



         4.       Termination.
                  -----------

                  4.1    Death. If Executive dies during the term of this
Agreement, Executive's employment hereunder shall terminate and the Company
shall pay to Executive's estate the amount set forth in Section 4.7.

                  4.2    Disability. The Company, by written notice to
Executive, may terminate Executive's employment hereunder if Executive shall
fail because of illness or incapacity to render, for six consecutive months,
services of the character contemplated by this Agreement. Upon such termination,
the Company shall pay to Executive the amount set forth in Section 4.7.

                  4.3    By Company for "Cause". The Company, by written notice
to Executive, may terminate Executive's employment hereunder for "Cause". As
used herein, "Cause" shall mean: (a) the refusal or failure by Executive to
carry out specific directions of the Board which are of a material nature and
consistent with his status as President, CFO and Executive Vice President (or
whichever positions Executive holds at such time), or the refusal or failure by
Executive to perform a material part of Executive's duties hereunder; (b) the
commission by Executive of a material breach of any of the provisions of this
Agreement; (c) fraud or dishonest action by Executive in his relations with the
Company or any of its subsidiaries or affiliates ("dishonest" for these purposes
shall mean Executive's knowingly or recklessly making of a material misstatement
or omission for his personal benefit); or (d) the conviction of Executive of a
felony under federal or state law. Notwithstanding the foregoing, no "Cause" for
termination shall be deemed to exist with respect to Executive's acts described
in clauses (a) or (b) above, unless the Company shall have given written notice
to Executive specifying the "Cause" with reasonable particularity and, within
thirty calendar days after such notice, Executive shall not have cured or
eliminated the problem or thing giving rise to such "Cause;" provided, however,
no more than two cure periods need be provided during any twelve-month period.
Upon such termination, the Company shall pay to Executive the amount set forth
in Section 4.7. In the event of a dispute as to the existence of suitable
"Cause" for termination pursuant this Section 4.3, Executive shall be entitled
to file for arbitration of such dispute in accordance with the rules of the
American Arbitration Association with one arbitrator to be selected by the
Company and one arbitrator to be selected by the Executive, and pending final




                                        4


<Page>


determination of such arbitration proceedings, Executive shall continue to be
compensated in accordance with the terms of this Agreement and shall be
reimbursed for his expenses including his legal costs.

                  4.4    By Company Without "Cause". The Company may terminate
Executive's employment hereunder without "Cause" by giving at least 30 days
written notice to Executive. Upon such termination, the Company shall pay to
Executive the amount set forth in Section 4.6.

                  4.5    By Executive for "Good Reason". The Executive, by
written notice to the Company, may terminate Executive's employment hereunder if
a "Good Reason" exists. For purposes of this Agreement, "Good Reason" shall mean
the occurrence of any of the following circumstances without the Executive's
prior written consent: (a) a substantial and material adverse change in the
nature of Executive's title, duties or responsibilities with the Company that
represents a demotion from his title, duties or responsibilities as in effect
immediately prior to such change; (b) Executive is not nominated or is removed
from service as a director of the Company; (c) material breach of this Agreement
by the Company; (d) a failure by the Company to make any payment to Executive
when due, unless the payment is not material and is being contested by the
Company, in good faith; (e) any person or entity other than the Company and/or
any officers or directors of the Company as of the date of this Agreement
acquires securities of the Company (in one or more transactions) having 30% or
more of the total voting power of all the Company's securities then outstanding;
or (f) a liquidation, bankruptcy or receivership of the Company. Notwithstanding
the foregoing, no "Good Reason" shall be deemed to exist with respect to the
Company's acts described in clauses (a), (c) or (d) above, unless Executive
shall have given written notice to the Company specifying the "Good Reason" with
reasonable particularity and, within thirty calendar days after such notice, the
Company shall not have cured or eliminated the problem or thing giving rise to
such "Good Reason"; provided, however, that no more than two cure periods shall
be provided during any twelve-month period of a breach of clauses (a), (c) or
(d) above. Upon such termination, the Company shall pay to Executive the amount
set forth in Section 4.7.

                  4.6    By Executive Without Reason. The Executive may
terminate his employment hereunder by giving at least 75 days written notice to
the Company. Upon such termination, the Company shall pay to Executive the
amount set forth in Section 4.7.




                                        5


<Page>



                  4.7    Compensation Upon Termination.  In the event that
Executive's employment hereunder is terminated, the Company shall pay to
Executive the following compensation:

                         (a)   Payment Upon Death or Disability or by Executive
Without Reason. In the event that Executive's employment is terminated pursuant
to Sections 4.1, 4.2 or 4.6, the Company shall pay to Executive (or his
executor, administrator or personal representative), (i) the Base Salary due
Executive pursuant to Section 2.1 hereof through the date of termination; (ii)
any Bonus which would have become payable under Section 2.2 for the year in
which the employment was terminated prorated by multiplying the full amount of
the Bonus by a fraction, the numerator of which is the number of "full calendar
months" worked by Executive during the year of termination and the denominator
of which is 12 (a "full calendar month" is a month in which the Executive worked
at least two weeks); (iii) all earned and previously approved but unpaid Bonuses
for any year prior to the year of termination; (iv) all valid expense
reimbursements, and (v) all accrued but unused vacation pay.

                          (b)   Payment Upon Termination by the Company For
"Cause". In the event that the Company terminates Executive's employment
hereunder pursuant to Section 4.3, the Company shall pay to Executive his Base
Salary, all valid expense reimbursements and all unused vacation pay required by
law through the date of termination.

                          (c)   Payment Upon Termination by Company Without
Cause or  Executive for Good Reason. In the event that Executive's employment is
terminated pursuant to Sections 4.4 or 4.5, the Company shall (i) continue to
pay to Executive (or in the case of his death, the legal representative of
Executive's estate or such other person or persons as Executive shall have
designated by written notice to the Company), all payments, compensation and
benefits required under Section 2 hereof through December 31, 2004, and (ii)
continue to maintain and pay for the same medical insurance then covering
Executive through June 30, 2006. Notwithstanding the foregoing, if a "change of
control" of the Company (as described in Section 4.5(e)) occurs prior to a
termination of Executive's employment pursuant to Sections 4.4 or 4.5, then at
the option of Executive, in lieu of the above compensation and benefits, the
Company shall pay to Executive a lump sum payment on the date of termination




                                        6


<Page>


equal to three times (3X) the total compensation (including salary and bonus)
earned by Executive during the last full calendar year of his employment.

                         (d)   Executive shall have no duty to mitigate awards
paid or payable to him pursuant to this Agreement, and any compensation paid or
payable to Executive from sources other than the Company will not offset or
terminate the Company's obligation to pay to Executive the full amounts pursuant
to this Agreement.

                  4.8    Resignation as Member of Board. If Executive's
employment hereunder is terminated for any reason, then Executive shall, at the
Company's request, resign as a director of the Company and all of its
subsidiaries, effective upon the occurrence of such termination.

         5.       Executive Indemnity. The Company agrees to indemnify Executive
and hold Executive harmless against all costs, expenses (including, without
limitation, reasonable attorneys' fees) and liabilities (other than settlements
to which the Company does not consent, which consent shall not be unreasonably
withheld) (collectively, "Losses") reasonably incurred by Executive in
connection with any claim, action, proceeding or investigation brought against
or involving Executive with respect to, arising out of or in any way relating to
Executive's employment with the Company or any subsidiary or Executive's service
as a director of the Company or any subsidiary; provided, however, that the
Company shall not be required to indemnify Executive for Losses incurred as a
result of Executive's intentional misconduct or gross negligence (other than
matters where Executive acted in good faith and in a manner he reasonably
believed to be in and not opposed to the Company's best interests). Executive
shall promptly notify the Company of any claim, action, proceeding or
investigation under this paragraph and the Company shall be entitled to
participate in the defense of any such claim, action, proceeding or
investigation and, if it so chooses, to assume the defense with counsel selected
by the Company; provided that Executive shall have the right to employ counsel
to represent him (at the Company's expense) if the Company's counsel would have
a "conflict of interest" in representing both the Company and Executive. The
Company shall not settle or compromise any claim, action, proceeding or
investigation without Executive's consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if the settlement entails only the payment of money and the Company
fully indemnifies Executive in connection therewith. The Company further agrees




                                        7


<Page>


to advance any and all expenses (including, without limitation, the reasonable
fees and expenses of counsel) incurred by the Executive (in accordance with the
foregoing) in connection with any such claim, action, proceeding or
investigation, provided, however, that Executive shall repay such advances if
indemnification is found not to have been available hereunder. This Section
shall survive the termination of this Agreement for any reason. To the extent
that the Company obtains director and officers' insurance coverage for any
period in which Executive was an officer, director or consultant to the Company,
Executive shall be a named insured and shall be entitled to coverage thereunder.

         6.       Protection of Confidential Information; Non-Competition.
                  -------------------------------------------------------

                  6.1    Acknowledgment.  Executive acknowledges that:

                         (a)   As a result of his current and prior employment
with  the Company, Executive has obtained and will obtain secret and
confidential information concerning the business of the Company and its
subsidiaries (referred to collectively in this Section 6 as the "Company"),
including, without limitation, financial information, proprietary rights, trade
secrets and "know-how," customers and sources ("Confidential Information").

                          (b)  The Company will suffer substantial damage which
will be difficult to compute if, during the period of his employment with the
Company or thereafter, Executive should enter a business competitive with the
Company or divulge Confidential Information.

                          (c)   The provisions of this Agreement are reasonable
and necessary for the protection of the business of the Company.

                  6.2     Confidentiality. Executive agrees that he will not at
any time, during the Employment Term and for a period of one year thereafter,
divulge to any person or entity any Confidential Information obtained or learned
by him as a result of his employment with the Company, except (i) in the course
of performing his duties hereunder, (ii) with the Company's prior written
consent; (iii) to the extent that any such information is in the public domain
other than as a result of Executive's breach of any of his obligations
hereunder; or (iv) where required to be dis closed by court order, subpoena or




                                        8


<Page>


other government process. If Executive shall be required to make disclosure
pursuant to the provisions of clause (iv) of the preceding sentence, Executive
promptly, but in no event more than 48 hours after learning of such subpoena,
court order, or other government process, shall notify, confirmed by mail, the
Company and, at the Company's expense, Executive shall: (a) take all reasonably
necessary and lawful steps required by the Company to defend against the
enforcement of such subpoena, court order or other government process, and (b)
permit the Company to intervene and participate with counsel of its choice in
any proceeding relating to the enforcement thereof.

                  6.3    Documents. Upon termination of his employment with the
Company, Executive will promptly deliver to the Company all memoranda, notes,
records, reports, manuals, drawings, blueprints and other documents (and all
copies thereof) relating to the business of the Company and all property
associated therewith, which he may then possess or have under his con trol;
provided, however, that Executive shall be entitled to retain copies of such
documents reasonably necessary to document his financial relationship with the
Company.

                  6.4    Non-competition. During the Employment Term and for a
period of one year thereafter, Executive, without the prior written permission
of the Company, shall not, anywhere in the world, (i) be employed by, or render
any services to, any person, firm or corporation engaged in any business
("Competitive Business") which is directly in competition with any "material"
business conducted by the Company or any of its subsidiaries at the time of
termination (as used herein "material" means the business generated at least 10%
of the Company's consolidated revenues for the last full fiscal year for which
audited financial statements are available); (ii) engage in any Competitive
Business for his or its own account; (iii) be associated with or interested in
any Competitive Business as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, trustee, consultant, advisor or
in any other relationship or capacity; (iv) employ or retain, or have or cause
any other person or entity to employ or retain, any person who was employed or
retained by the Company while Executive was employed by the Company (other than
Executive's personal secretary and assistant); or (v) solicit, interfere with,
or endeavor to entice away from the Company, for the benefit of a Competitive
Business, any of its customers or other persons with whom the Company has a
contractual relationship. Notwithstanding the foregoing, nothing in this
Agreement shall preclude Executive from investing his personal assets in any



                                        9
<Page>



manner he chooses, provided, however, that Executive may not, during the period
referred to in this Section 6.4, own more than 4.9% of the equity securities of
any Competitive Business.

                  6.5    Injunctive Relief. If Executive commits a breach, or
threatens to commit a breach, of any of the provisions of Sections 6.2 or 6.4,
the Company shall have the right and remedy to seek to have the provisions of
this Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by Executive that the services being rendered
hereunder to the Company are of a special, unique and extraordinary character
and that any such breach or threatened breach will cause irreparable injury to
the Company and that money damages will not provide an adequate remedy to the
Company. The rights and remedies enumerated in this Section 6.5 shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or equity. In connection with any legal action or proceeding
arising out of or relating to this Agreement, the prevailing party in such
action or proceeding shall be entitled to be reimbursed by the other party for
the reasonable attorneys' fees and costs incurred by the prevailing party.

                  6.6    Modification. If any provision of Sections 6.2 or 6.4
is held to be unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have the power to
modify such scope, duration, or area, or all of them, and such provision or
provisions shall then be applicable in such modified form.

                  6.7    Survival. The provisions of this Section 6 shall
survive the termination of this Agreement for any reason, except in the event
Executive is terminated by the Company without "Cause, " or if Executive
terminates this Agreement with "Good Reason," in either of which events, this
Section 6.4 shall be null and void and of no further force or effect.

         7.       Miscellaneous Provisions.
                  ------------------------

                  7.1    Notices. All notices provided for in this Agreement
shall be in writing, and shall be deemed to have been duly given when (i)
delivered personally to the party to receive the same, or (ii) when mailed first
class postage prepaid, by certified mail, return receipt requested, addressed to
the party to receive the same at his or its address set forth below, or such




                                       10


<Page>


other address as the party to receive the same shall have specified by written
notice given in the manner provided for in this Section 7.1. All notices shall
be deemed to have been given as of the date of personal delivery or mailing
thereof.

                  If to Executive:

                           Edward J. Fred
                           126 Brentwood Parkway
                           Brentwood, New York 11717


                  If to the Company:

                           CPI Aerostructures, Inc.
                           200A Executive Drive
                           Edgewood, New York  11717
                           Attn:  Chairman


                  With a copy in either case to:

                           Graubard Miller
                           600 Third Avenue
                           New York, New York  10016
                           Attn:  David Alan Miller, Esq.


                  7.2    Entire Agreement; Waiver. This Agreement sets forth the
entire agreement of the parties relating to the employment of Executive and is
intended to supersede all prior negotia tions, understandings and agreements. No
provisions of this Agreement, may be waived or changed except by a writing by
the party against whom such waiver or change is sought to be enforced. The
failure of any party to require performance of any provision hereof or thereof
shall in no manner affect the right at a later time to enforce such provision.

                  7.3    Governing Law. All questions with respect to the
construction of this Agreement, and the rights and obligations of the parties
hereunder, shall be determined in accordance with the law of the State of New
York applicable to agreements made and to be performed entirely in New York.




                                       11


<Page>


                  7.4     Binding Effect; Nonassignability.  This Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
the Company. This Agreement shall not be assignable by Executive, but shall
inure to the benefit of and be binding upon Executive's heirs and legal
representatives.

                  7.5    Severability. Should any provision of this Agreement
become legally unenforceable, no other provision of this Agreement shall be
affected, and this Agreement shall continue as if the Agreement had been
executed absent the unenforceable provision.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.


                               CPI AEROSTRUCTURES, INC.

                                /s/ Arthur August
                               ---------------------------------------
                               By:  Arthur August, Chairman, President
                                      and Chief Executive Officer

                                /s/ Edward J. Fred
                               ---------------------------------------
                               EDWARD J. FRED



                                       12


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>4
<FILENAME>cpi_10qsb-exh1038.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT FOR ARTHUR AUGUST
<TEXT>
                                                                   Exhibit 10.38

                              EMPLOYMENT AGREEMENT

                  AGREEMENT dated August 14, 2001 between ARTHUR AUGUST
("Executive"), and CPI AEROSTRUCTURES, INC. ("Company");

                  WHEREAS, the Company desires to continue the employment of
Executive and Executive desires to continue his present employment with the
Company, pursuant to the terms and conditions herein set forth, superseding all
prior agreements between the Company, its subsidiaries and/or predecessors and
Executive;

                  IT IS AGREED:

                  1.  Employment, Duties and Acceptance.
                      ---------------------------------

                      1.1    General. The Company shall employ Executive from
August 14, 2001 until December 31, 2001 as its Chairman of the Board
("Chairman"), President and Chief Executive Officer ("CEO") and from January 1,
2002 until December 31, 2004, as its Chairman and CEO, under the terms hereof.
All of Executive's powers and authority in any capacity shall at all times be
subject to the direction and control of the Company's Board of Directors. The
Board may assign to Executive such management and supervisory responsibilities
and executive duties for the Company or any subsidiary of the Company, including
serving as an executive officer and/or director of any subsidiary, as are
consistent with Executive's status as Chairman, President and CEO, as the case
may be. The Company and Executive acknowledge that Executive's functions and
duties as Chairman, President and CEO, as the case may be, include establishing
policies and strategies for the Company's overall business and operations,
including plans for growth and strategic alliances.

                      1.2    Full-Time Position Through 12/31/02. Executive
accepts such employment and agrees to devote substantially all of his business
time, energies and attention to the performance of his duties hereunder through
December 31, 2002 and thereafter, to devote such time as he, in his sole
discretion, deems to be necessary. Nothing herein shall be construed as
preventing Executive from making and supervising personal investments, provided



<Page>



they will not interfere with the performance of Executive's duties hereunder or
violate the provisions of Section 6.4 hereof.

                      1.3    Location. The Company will maintain its principal
executive offices within a 30 mile radius of its current location in Edgewood,
New York. Notwithstanding the foregoing, Executive may, in his sole discretion,
perform his obligations under this Agreement off the premises of the Company.
Additionally, Executive may maintain an office in, adjacent to, or within the
vicinity of his residence, and the Company shall reimburse him for all costs
reasonably related thereto (including secretarial assistance, telephone, fax,
computer and other communications equipment).

                      1.4    Board of Directors Position. At any time during the
term hereof that Executive is not serving as a director of the Company, he shall
nonetheless be invited to attend each meeting of the Board of Directors of the
Company.

                  2.  Compensation and Benefits.
                      -------------------------

                      2.1    Salary. The Company shall pay to Executive a salary
("Base Salary") at the annual rate of not less than $300,000 per annum from
August 14, 2001 until December 31, 2002 and at the annual rate of not less than
$100,000 from January 1, 2003 until December 31, 2004. Executive's compensation
shall be paid in equal, periodic installments in accordance with the Company's
normal payroll procedures.

                      2.2    Bonus. In addition to Base Salary, Executive shall
be paid a bonus ("Bonus") equal to 4% of the Company's consolidated net income
for the year ending December 31, 2001 and 2002; equal to 3% of the Company's
consolidated net income for the year ending December 31, 2003; and equal to 2%
of the Company's consolidated net income for the year ending December 31, 2004,
as determined by reference to the Company's audited financial statements for
such year. The amount of the Bonus shall be pro-rated to the date of termination
of Executive's employment. The Bonus with respect to any year shall be paid on
or prior to April 15 of the following year.



                                        2



<Page>




                      2.3    Additional Compensation. As additional compensation
for Executive entering into this Agreement and agreeing to be bound by its terms
(including Article 6 hereof) and for the services to be rendered by Executive
hereunder, the Company hereby issues to Executive options to purchase 100,000
shares of Common Stock under the Company's Performance Equity Plan 2000. These
options ("Agreement Options") shall be evidenced by one or more Stock Option
Agreements of even date herewith between the Company and Executive. The
Agreement Options will have an exercise price of $1.20 per share and will vest
immediately. The Compensation Committee may, in its discretion, grant additional
options to Executive during the term of this Agreement.

                      2.4    Benefits. Executive shall be entitled to such
medical, life, disability and other benefits as are generally afforded to other
senior executives of the Company, subject to applicable waiting periods and
other conditions.

                      2.5    Vacation. Executive shall be entitled to such paid
vacation days in each year during the Employment Term and to a reasonable number
of other days off for religious and personal reasons in accordance with
customary Company policy.

                      2.6    Automobile. The Company shall continue to lease a
luxury class automobile (reasonably satisfactory to Executive) for Executive
during the term of this Agreement to be used in connection with the business of
the Company. The Company shall reimburse Executive for all costs associated with
the use of a vehicle, including lease and insurance costs, repairs and
maintenance.

                      2.7    Expenses. The Company shall pay or reimburse
Executive for all transportation, hotel and other expenses reasonably incurred
by Executive on business trips (including business class air travel if the
scheduled flight is more than two (2) consecutive hours) and for all other
ordinary and reasonable out-of-pocket expenses actually incurred by him in the
conduct of the business of the Company against itemized vouchers submitted with
respect to any such expenses and approved in accordance with customary
procedures.



                                        3



<Page>




                      2.8    Life Insurance.  During the Employment Term, as
defined below, the Company shall continue to maintain the insurance policy on
the life of Executive in favor of his named beneficiary or his estate in a
minimum amount of $500,000.

                  3.  Term. The term of Executive's employment hereunder shall
commence as of August 14, 2001 and shall continue until December 31, 2004 (as it
may be extended, the "Employment Term"), unless sooner terminated as herein
provided. The Employment Term shall be automatically renewed for successive one
year periods unless terminated by the Company or Executive by written notice to
the other party at least thirty (30) days before the end of the Employment Term
or any renewal thereof.

                  4.  Termination.
                      -----------

                     4.1    Death. If Executive dies during the term of this
Agreement, Executive's employment hereunder shall terminate and the Company
shall pay to Executive's estate the amount set forth in Section 4.7.

                     4.2    Disability. The Company, by written notice to
Executive, may terminate Executive's employment hereunder if Executive shall
fail because of illness or incapacity to render, for six consecutive months,
services of the character contemplated by this Agreement. Upon such termination,
the Company shall pay to Executive the amount set forth in Section 4.7.

                      4.3    By Company for "Cause". The Company, by written
notice to Executive, may terminate Executive's employment hereunder for "Cause".
As used herein, "Cause" shall mean: (a) the refusal or failure by Executive to
carry out specific directions of the Board which are of a material nature and
consistent with his status as Chairman, President and CEO (or whichever
positions Executive holds at such time), or the refusal or failure by Executive
to perform a material part of Executive's duties hereunder; (b) the commission
by Executive of a material breach of any of the provisions of this Agreement;
(c) fraud or dishonest action by Executive in his relations with the Company or
any of its subsidiaries or affiliates ("dishonest" for these purposes shall mean
Executive's knowingly or recklessly making of a material misstatement or



                                        4


<Page>



omission for his personal benefit); or (d) the conviction of Executive of a
felony under federal or state law. Notwithstanding the foregoing, no "Cause" for
termination shall be deemed to exist with respect to Executive's acts described
in clauses (a) or (b) above, unless the Company shall have given written notice
to Executive specifying the "Cause" with reasonable particularity and, within
thirty calendar days after such notice, Executive shall not have cured or
eliminated the problem or thing giving rise to such "Cause;" provided, however,
no more than two cure periods need be provided during any twelve-month period.
Upon such termination, the Company shall pay to Executive the amount set forth
in Section 4.7. In the event of a dispute as to the existence of suitable
"Cause" for termination pursuant this Section 4.3, Executive shall be entitled
to file for arbitration of such dispute in accordance with the rules of the
American Arbitration Association with one arbitrator to be selected by the
Company and one arbitrator to be selected by the Executive, and pending final
determination of such arbitration proceedings, Executive shall continue to be
compensated in accordance with the terms of this Agreement and shall be
reimbursed for his expenses including his legal costs.

                      4.4    By Company Without "Cause". The Company may
terminate Executive's employment hereunder without "Cause" by giving at least 30
days written notice to Executive. Upon such termination, the Company shall pay
to Executive the amount set forth in Section 4.7.

                      4.5    By Executive for "Good Reason". The Executive, by
written notice to the Company, may terminate Executive's employment hereunder if
a "Good Reason" exists. For purposes of this Agreement, "Good Reason" shall mean
the occurrence of any of the following circumstances without the Executive's
prior written consent: (a) a substantial and material adverse change in the
nature of Executive's title, duties or responsibilities with the Company that
represents a demotion from his title, duties or responsibilities as in effect
immediately prior to such change; (b) Executive is not nominated or is removed
from service as a director of the Company; (c) material breach of this Agreement
by the Company; (d) a failure by the Company to make any payment to Executive
when due, unless the payment is not material and is being contested by the
Company, in good faith; (e) any person or entity other than the Company and/or
any officers or directors of the Company as of the date of this Agreement
acquires securities of the Company (in one or more transactions) having 30% or
more of the total voting power of all the Company's securities then outstanding;
or (f) a liquidation, bankruptcy or receivership of the Company. Notwithstanding




                                        5



<Page>


the foregoing, no "Good Reason" shall be deemed to exist with respect to the
Company's acts described in clauses (a), (c) or (d) above, unless Executive
shall have given written notice to the Company specifying the "Good Reason" with
reasonable particularity and, within thirty calendar days after such notice, the
Company shall not have cured or eliminated the problem or thing giving rise to
such "Good Reason"; provided, however, that no more than two cure periods shall
be provided during any twelve-month period of a breach of clauses (a), (c) or
(d) above. Upon such termination the Company shall pay to Executive the amount
set forth in Section 4.7

                      4.6    By Executive Without Reason.  The Executive may
terminate his employment hereunder by giving at least 75 days written notice to
the Company. Upon such termination, the Company shall pay to Executive the
amount set forth in Section 4.7.

                      4.7    Compensation Upon Termination.  In the event that
Executive's employment hereunder is terminated, the Company shall pay to
Executive the following compensation:

                             (a)   Payment Upon Death or Disability or by
Executive Without Reason. In the event that Executive's employment is terminated
pursuant to Sections 4.1, 4.2 or 4.6, the Company shall pay to Executive (or his
executor, administrator or personal representative), (i) the Base Salary due
Executive pursuant to Section 2.1 hereof through the date of termination; (ii)
any Bonus which would have become payable under Section 2.2 for the year in
which the employment was terminated prorated by multiplying the full amount of
the Bonus by a fraction, the numerator of which is the number of "full calendar
months" worked by Executive during the year of termination and the denominator
of which is 12 (a "full calendar month" is a month in which the Executive worked
at least two weeks); (iii) all earned and previously approved but unpaid Bonuses
for any year prior to the year of termination; (iv) all valid expense
reimbursements, (v) all accrued but unused vacation pay, and (vi) the payments
required by Section 4.7(d), below.

                              (b)   Payment Upon Termination by the Company For
"Cause". In the event that the Company terminates Executive's employment
hereunder pursuant to Section 4.3, the Company shall pay to Executive his Base




                                        6



<Page>


Salary, all valid expense reimbursements, all unused vacation pay required by
law through the date of termination, and the payments required by Section
4.7(d), below.

                              (c)   Payment Upon Termination by Company Without
"Cause" or Executive for "Good Reason". In the event that Executive's employment
is terminated, pursuant to Sections 4.4 or 4.5, the Company shall (i) continue
to pay to Executive (or in the case of his death, the legal representative of
Executive's estate or such other person or persons as Executive shall have
designated by written notice to the Company), all payments, compensation and
benefits required under Section 2 hereof through December 31, 2004, (ii)
continue to maintain and pay for the same medical insurance then covering
Executive through June 30, 2006, and (iii) make the payments to Executive
required by Section 4.7(d), below. Notwithstanding the foregoing, if a "change
of control" of the Company (as described in Section 4.5(e)) occurs prior to a
termination of Executive's employment pursuant to Sections 4.4 or 4.5, then at
the option of Executive, in lieu of the above compensation and benefits, the
Company shall pay to Executive a lump sum payment on the date of termination
equal to three times (3X) the total compensation (including salary and bonus)
earned by Executive during the last full calendar year of his employment.

                              (d)   Non-compete Payments.  In consideration of
Executive's agreement not to compete with the Company for an extended period of
time pursuant to Section 6.4 hereof, the Company agrees to pay Executive the
aggregate sum of $300,000 ("Non-compete Fee"). The Non-compete Fee shall be
paid to Executive in the event that his employment is terminated for any reason,
even if his employment is terminated in a manner which causes Section 6.4 hereof
to become null and void pursuant to Section 6.7. The Non-compete Fee shall be
paid to Executive (or his estate, in the event of his death) in five equal
installments of $60,000 each, commencing on the date of termination of
employment and continuing on each of the first four annual anniversaries
thereof. The Non-compete Fee shall be in addition to any other payment required
to be made to Executive hereunder.



                                       7
<Page>

                              (e)   Executive shall have no duty to mitigate
awards paid or payable to him pursuant to this Agreement, and any compensation
paid or payable to Executive from sources other than the Company will not offset
or terminate the Company's obligation to pay to Executive the full amounts
pursuant to this Agreement.

                      4.8     Resignation as Member of Board.  If Executive's
employment hereunder is terminated for any reason, then Executive shall, at the
Company's request, resign as a director of the Company and all of its
subsidiaries, effective upon the occurrence of such termination.

                  5.  Executive Indemnity. The Company agrees to indemnify
Executive and hold Executive harmless against all costs, expenses (including,
without limitation, reasonable attorneys' fees) and liabilities (other than
settlements to which the Company does not consent, which consent shall not be
unreasonably withheld) (collectively, "Losses") reasonably incurred by Executive
in connection with any claim, action, proceeding or investigation brought
against or involving Executive with respect to, arising out of or in any way
relating to Executive's employment with the Company or any subsidiary or
Executive's service as a director of the Company or any subsidiary; provided,
however, that the Company shall not be required to indemnify Executive for
Losses incurred as a result of Executive's intentional misconduct or gross
negligence (other than matters where Executive acted in good faith and in a
manner he reasonably believed to be in and not opposed to the Company's best
interests). Executive shall promptly notify the Company of any claim, action,
proceeding or investigation under this paragraph and the Company shall be
entitled to participate in the defense of any such claim, action, proceeding or
investigation and, if it so chooses, to assume the defense with counsel selected
by the Company; provided that Executive shall have the right to employ counsel
to represent him (at the Company's expense) if the Company's counsel would have
a "conflict of interest" in representing both the Company and Executive. The
Company shall not settle or compromise any claim, action, proceeding or
investigation without Executive's consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if the settlement entails only the payment of money and the Company
fully indemnifies Executive in connection therewith. The Company further agrees
to advance any and all expenses (including, without limitation, the reasonable
fees and expenses of counsel) incurred by the Executive (in accordance with the
foregoing) in connection with any such claim, action, proceeding or
investigation, provided, however, that Executive shall repay such advances if
indemnification is found not to have been available hereunder. This Section
shall survive the termination of this Agreement for any reason. To the extent
that the Company obtains director and officers' insurance coverage for any




                                        8



<Page>


period in which Executive was an officer, director or consultant to the Company,
Executive shall be a named insured and shall be entitled to coverage thereunder.

                  6. Protection of Confidential Information; Non-Competition.
                     -------------------------------------------------------

                     6.1     Acknowledgment.  Executive acknowledges that:

                            (a)   As a result of his current and prior
employment with the Company, Executive has obtained and will obtain secret and
confidential information concerning the business of the Company and its
subsidiaries (referred to collectively in this Section 6 as the "Company"),
including, without limitation, financial information, proprietary rights, trade
secrets and "know-how," customers and sources ("Confidential Information").

                             (b)   The Company will suffer substantial damage
which will be difficult to compute if, during the period of his employment with
the Company or thereafter, Executive should enter a business competitive with
the Company or divulge Confidential Information.

                             (c)   The provisions of this Agreement are
reasonable and necessary for the protection of the business of the Company.

                     6.2     Confidentiality.  Executive agrees that he will not
at any time, during the Employment Term and for a period of one year thereafter,
divulge to any person or entity any Confidential Information obtained or learned
by him as a result of his employment with the Company, except (i) in the course
of performing his duties hereunder, (ii) with the Company's prior written
consent; (iii) to the extent that any such information is in the public domain
other than as a result of Executive's breach of any of his obligations
hereunder; or (iv) where required to be disclosed by court order, subpoena or
other government process. If Executive shall be required to make disclosure
pursuant to the provisions of clause (iv) of the preceding sentence, Executive
promptly, but in no event more than 48 hours after learning of such subpoena,
court order, or other government process, shall notify, confirmed by mail, the
Company and, at the Company's expense, Executive shall: (a) take all reasonably
necessary and lawful steps required by the Company to defend against the




                                        9


<Page>


enforcement of such subpoena, court order or other government process, and (b)
permit the Company to intervene and participate with counsel of its choice in
any proceeding relating to the enforcement thereof.

                      6.3    Documents. Upon termination of his employment with
the Company, Executive will promptly deliver to the Company all memoranda,
notes, records, reports, manuals, drawings, blueprints and other documents (and
all copies thereof) relating to the business of the Company and all property
associated therewith, which he may then possess or have under his control;
provided, however, that Executive shall be entitled to retain copies of such
documents reasonably necessary to document his financial relationship with the
Company.

                      6.4    Non-competition. During the Employment Term and for
a period of five years thereafter, Executive, without the prior written
permission of the Company, shall not, anywhere in the world, (i) be employed by,
or render any services to, any person, firm or corporation engaged in any
business ("Competitive Business") which is directly in competition with any
"material" business conducted by the Company or any of its subsidiaries at the
time of termination (as used herein "material" means the business generated at
least 10% of the Company's consolidated revenues for the last full fiscal year
for which audited financial statements are available); (ii) engage in any
Competitive Business for his or its own account; (iii) be associated with or
interested in any Competitive Business as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; (iv) employ or retain, or have
or cause any other person or entity to employ or retain, any person who was
employed or retained by the Company while Executive was employed by the Company
(other than Executive's personal secretary and assistant); or (v) solicit,
interfere with, or endeavor to entice away from the Company, for the benefit of




                                       10

<Page>


a Competitive Business, any of its customers or other persons with whom the
Company has a contractual relationship. Notwithstanding the foregoing, nothing
in this Agreement shall preclude Executive from investing his personal assets in
any manner he chooses, provided, however, that Executive may not, during the
period referred to in this Section 6.4, own more than 4.9% of the equity
securities of any Competitive Business.

                      6.5    Injunctive Relief.  If Executive commits a breach,
or threatens to commit a breach, of any of the provisions of Sections 6.2 or
6.4, the Company shall have the right and remedy to seek to have the provisions
of this Agreement specifically enforced by any court having equity jurisdiction,
it being acknowledged and agreed by Executive that the services being rendered
hereunder to the Company are of a special, unique and extraordinary character
and that any such breach or threatened breach will cause irreparable injury to
the Company and that money damages will not provide an adequate remedy to the
Company. The rights and remedies enumerated in this Section 6.5 shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or equity. In connection with any legal action or proceeding
arising out of or relating to this Agreement, the prevailing party in such
action or proceeding shall be entitled to be reimbursed by the other party for
the reasonable attorneys' fees and costs incurred by the prevailing party.

                      6.6    Modification. If any provision of Sections 6.2 or
6.4 is held to be unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have the power to
modify such scope, duration, or area, or all of them, and such provision or
provisions shall then be applicable in such modified form.

                      6.7    Survival. The provisions of this Section 6 shall
survive the termination of this Agreement for any reason, except in the event
Executive is terminated by the Company without "Cause, " or if Executive
terminates this Agreement with "Good Reason," in either of which events, Section
6.4 shall be null and void and of no further force or effect.


                                       11



<Page>



                  7.  Miscellaneous Provisions.
                      ------------------------

                      7.1    Notices. All notices provided for in this Agreement
shall be in writing, and shall be deemed to have been duly given when (i)
delivered personally to the party to receive the same, or (ii) when mailed first
class postage prepaid, by certified mail, return receipt requested, addressed to
the party to receive the same at his or its address set forth below, or such
other address as the party to receive the same shall have specified by written
notice given in the manner provided for in this Section 7.1. All notices shall
be deemed to have been given as of the date of personal delivery or mailing
thereof.

                  If to Executive:

                           Arthur August
                           c/o CPI Aerostructures, Inc.
                           200A Executive Drive
                           Edgewood, New York 11717

                  If to the Company:

                           CPI Aerostructures, Inc.
                           200A Executive Drive
                           Edgewood, New York  11717
                           Attn: Chief Financial Officer

                  With a copy in either case to:

                           Graubard Miller
                           600 Third Avenue
                           New York, New York  10016
                           Attn: David Alan Miller, Esq.


                      7.2     Entire Agreement; Waiver.  This Agreement sets
forth the entire agreement of the parties relating to the employment of
Executive and is intended to supersede all prior negotiations, understandings
and agreements. No provisions of this Agreement, may be waived or changed except
by a writing by the party against whom such waiver or change is sought to be
enforced. The failure of any party to require performance of any provision
hereof or thereof shall in no manner affect the right at a later time to enforce
such provision.



                                       12



<Page>



                           7.3    Governing Law.  All questions with respect to
the construction of this Agreement, and the rights and obligations of the
parties hereunder, shall be determined in accordance with the law of the State
of New York applicable to agreements made and to be performed entirely in New
York.

                           7.4    Binding Effect; Nonassignability.  This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company. This Agreement shall not be assignable by Executive, but
shall inure to the benefit of and be binding upon Executive's heirs and legal
representatives.

                           7.5    Severability.  Should any provision of this
Agreement become legally unenforceable, no other provision of this Agreement
shall be affected, and this Agreement shall continue as if the Agreement had
been executed absent the unenforceable provision.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.

                               CPI AEROSTRUCTURES, INC.

                                /s/ Edward J. Fred
                               ---------------------------------------
                               By:  Edward J. Fred, Vice President and
                                        Chief Financial Officer

                                /s/ Arthur August
                               ---------------------------------------
                               ARTHUR AUGUST



                                       13


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
