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<SEC-DOCUMENT>0001094891-03-000025.txt : 20030205
<SEC-HEADER>0001094891-03-000025.hdr.sgml : 20030205
<ACCEPTANCE-DATETIME>20030205172638
ACCESSION NUMBER:		0001094891-03-000025
CONFORMED SUBMISSION TYPE:	SB-2/A
PUBLIC DOCUMENT COUNT:		5
FILED AS OF DATE:		20030205

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:		SB-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-101902
		FILM NUMBER:		03541314

	BUSINESS ADDRESS:	
		STREET 1:		200A EXECUTIVE DR
		CITY:			EDGEWOOD
		STATE:			NY
		ZIP:			11717
		BUSINESS PHONE:		5165865200
</SEC-HEADER>
<DOCUMENT>
<TYPE>SB-2/A
<SEQUENCE>1
<FILENAME>cpi_am2.txt
<DESCRIPTION>FORM SB-2/A
<TEXT>


     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 5, 2003
                                                  Registration No. 333-101902
- --------------------------------------------------------------------------------


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM SB-2
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

                               (Amendment No. 2)


                            CPI AEROSTRUCTURES, INC.
                 (Name of Small Business Issuer in its Charter)


 New York                         3728                           11-2520310
- ----------                  ------------------              -----------------
(State or other        (Primary Standard Industrial         (I.R.S. Employer
jurisdiction of         Industrial Classification           Identification No.)
incorporation or               Code Number)
organization)


                 200A Executive Drive, Edgewood, New York 11717
                                 (631) 586-5200
          (Address and telephone number of principal executive offices)

               Arthur August, Chairman and Chief Executive Officer
                            CPI Aerostructures, Inc.
                              200A Executive Drive
                            Edgewood, New York 11717
                                 (631) 586-5200
            (Name, Address and Telephone Number of Agent for Service)
                                    Copy to:

                             David Alan Miller, Esq.
                                 Graubard Miller
                                600 Third Avenue
                               New York, NY 10016
                            Telephone: (212) 818-8800
                            Facsimile (212) 682-2320


Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
- ---------------------------------------------------------------------------

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis under Rule 415 under the Securities Act of 1933, as
amended, check the following box: [X]

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]

<PAGE>


<TABLE>
<CAPTION>

                         CALCULATION OF REGISTRATION FEE

- -------------------------------- ------------------ ------------------------------- --------------------------- --------------------
         Title of Each                Amount
      Class of Securities              To Be               Proposed Maximum              Proposed Maximum              Amount of
       To Be Registered             Registered      Offering Price Per Security(1)   Aggregate Offering Price      Registration Fee
       ----------------             ----------      -------------- ------------      ------------------------      ----------------
- -------------------------------- ------------------ ------------------------------- --------------------------- --------------------
<S>                               <C>               <C>                              <C>                        <C>
Common Shares, $.001                   2,300,000(2)            $4.250                     $9,775,000                        $899.30
Par value

Representative's Warrant                       1             $100.000                           $100                        --(3)

Common Shares Underlying                 200,000(4)            $4.675                       $935,000                         $86.02
Underwriter's Warrant
- -------------------------------- ------------------ ------------------------------- --------------------------- --------------------
   Total Amount Due                                                                                                      $985.32(5)
- -------------------------------- ------------------ ------------------------------- --------------------------- --------------------

</TABLE>

(1)  Estimated solely for the purpose of calculating the registration fee
     pursuant to Rule 457(a) under the Securities Act of 1933, as amended.



(2)  Includes 300,000 common shares that the underwriter has the option to
     purchase to cover over-allotments, if any.



(3)  No fee pursuant to Rule 457(g).

(4)  Issuable upon the exercise of Underwriter's Warrant. Pursuant to Rule
     416, there are also being registered additional securities as may be
     required for issuance pursuant to the anti-dilutive provisions of the
     warrant.

(5)  Previously paid.


The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.



<PAGE>
                                     [LOGO]

  The information in this prospectus is not complete and may be changed. We may
   not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
    to sell these securities and it is not soliciting an offer to buy these
         securities in any state where the offer or sale is permitted.


                 SUBJECT TO COMPLETION, DATED FEBRUARY 5, 2003

PROSPECTUS
                             2,000,000 Common Shares


                            CPI AEROSTRUCTURES, INC.




     We are offering for sale 2,000,000 of our common shares on a
firm-commitment basis. We have granted an over-allotment option to the
underwriter. Under this option, the underwriter may elect to purchase a
maximum of 300,000 additional common shares from us within 45 days following the
date of this prospectus to cover over-allotments, if any, under certain
circumstances.

     Our common shares are listed on the American Stock Exchange under the
symbol "CVU". The last reported sale price of our common shares on the AMEX on
February ___, 2003, was $____ per share.



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



     Investing in our common shares involves a high degree of risk. See "Risk
Factors" beginning on page 7 of this prospectus.



     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.


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



                                               Underwriting         Proceeds,
                                Public         discount and          before
                            offering price      commissions      expenses, to us
                            --------------      -----------      ---------------
Per common share...........  $                   $                $
         Total.............  $                   $                $



     EarlyBirdCapital, Inc. expects to deliver the shares to purchasers on or
about February __, 2003.



                             EarlyBirdCapital, Inc.
                                February __, 2003


<PAGE>
[ARTWORK - LOGO and Picture of the T-38 Aircraft, C-5 Wingtip Assemblies
and the A-10 windshields.]

<PAGE>


                                Table of Contents



Summary........................................................................3
Risk Factors...................................................................7
Use of Proceeds...............................................................12
Capitalization................................................................13
Management's Discussion and Analysis
        of Financial Condition and Results of  Operations.....................14
Business......................................................................18
Management....................................................................24
Principal Shareholders........................................................29
Description of Our Capital Shares.............................................30
Underwriting..................................................................33
Legal Matters.................................................................34
Experts.......................................................................34
Disclosure of Commission Position on Indemnification
        for Securities Act Liabilities........................................34
Where You Can Find Additional Information.....................................35
Index to Financial Statements................................................F-1



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

     You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
jurisdiction where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of this prospectus.














                                       2


<PAGE>
                                     Summary


     This summary highlights certain information appearing elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before purchasing our common shares. Unless
otherwise stated in this prospectus, references to "we," "us," "our" or "CPI"
refer to CPI Aerostructures, Inc. Unless otherwise stated, all financial
information contained in the prospectus does not include the discontinued
operations of our subsidiary, Kolar, Inc., and assumes that the underwriter
will not exercise its option to purchase an additional 300,000 shares.



General

     CPI Aerostructures, Inc. is engaged in the contract production of
structural aircraft parts principally for the United States Air Force and other
branches of the U.S. armed forces. We also provide aircraft parts to the
commercial sector of the aircraft industry but, due to the soft global economy,
we believe that significantly weaker business prospects exist in this sector.
Our strategy for growth includes de-emphasizing our commercial operations and
concentrating on government and military sales. All of our revenues for 2002 and
92% of our revenues for 2001 were derived from government contract sales. CPI
was awarded approximately $24.5 million in new contract awards in 2002, a 28%
increase over 2001. This marks the sixth consecutive year in which CPI has shown
double-digit growth in contract awards.



     We operate as a "mini-prime" contractor supplying structural aircraft parts
under prime contracts with several branches of the U.S. Government. In that
capacity, we deliver skin panels, leading edges, flight control surfaces, engine
components, wing tips, cowl doors, nacelle assemblies and inlet assemblies for
military aircraft such as the C-5A "Galaxy" cargo jet, the T-38 "Talon" jet
trainer, the C-130 "Hercules" cargo jet, the A-10 "Thunderbolt" or "Warthog"
attack jet and the E-3 "Sentry" AWACS jet. We also supply commercial aircraft
products including aprons and engine mounts, which attach jet engine housings to
aircraft such as the Lear 60 and Astra Galaxy business jets. Our products are
sub-assemblies, a series of parts fixed together to form a larger unit that will
comprise a part of a complex aerodynamic structure. In conjunction with our
assembly operations, we provide engineering, technical and program management
services to our customers.



      Due to budget constraints in the mid to late 1990's, the Clinton
Administration closed several military installations and began outsourcing the
assembly of component parts into subassemblies. Until then, the military had
performed this function internally. The ability to manage the bidding process,
subcontract production of components and assemble components into subassemblies
is our core competency and the government's decision to outsource this function
has resulted in increased business opportunities for us. Fueled by new defense
contract awards, our revenue has grown significantly over the past few years.
Our revenue growth has averaged 41% per annum since 1997. From 1997 through
2002, the dollar value of defense contracts awarded to us has increased at a
compounded annual growth rate of 53%.

     CPI has 22 years of experience as a prime contractor, completing over
1,100 contracts to date. Most members of our management team have held
management positions at large defense contractors, including Grumman, Lockheed
and Fairchild. Our technical team possesses extensive technical expertise and
program management and integration capabilities. Our competitive advantage lies
in our ability to offer large contractor capabilities with the flexibility and
responsiveness of a small company, while staying competitive in cost and
delivering superior quality products. While the larger prime contractors compete
for significant modification awards and subcontract components to other
suppliers, they generally do not compete for awards for smaller modifications or
spares and repair parts, even for planes for which they are the original
manufacturer. We also qualify as a small business because we have less than
1,000 employees, and this allows us to compete on military awards set aside for
companies with this small business status.

     While historically the majority of our contracts have been valued below
$200,000, we have recently competed for, and were awarded, significantly larger
contracts, including an estimated $61 million award for the T-38 "Talon" jet
trainer. We intend to continue to bid on these larger contracts. We will use the
proceeds of this offering to repay in full all of our indebtedness for borrowed
funds. We believe that our improved financial condition as a result of this
offering and our success with the T-38 program will allow us to compete more
effectively for larger awards in the future.



                                       3
<PAGE>

Corporate Information

     CPI was incorporated under the laws of the State of New York in January
1980 under the name Composite Products International, Inc. CPI changed its name
to Consortium of Precision Industries, Inc. in April 1989 and then to CPI
Aerostructures, Inc. in July 1992.

     Our principal office is located at 200A Executive Drive, Edgewood, New York
11717 and our telephone number is (631) 586-5200.

Discontinued Operations

     In 1997, in an effort to diversify our business, we acquired Kolar Machine,
Inc., a manufacturer of precision machined parts for the electronics industry.
As a result of the downturn in the electronic manufacturing sector, we
terminated Kolar's operations in December 2001, closed its Ithaca facility and
liquidated most of its assets through an auction in February 2002. As a result
of our decision to close the Kolar facilities and liquidate its assets, Kolar's
operations have been classified as "discontinued."

The Offering



Securities offered...............       2,000,000 common shares

Shares outstanding at
February _, 2003.................       2,805,668

Shares to be outstanding
after the offering...............       4,805,668

Use of proceeds..................       We intend to use the net proceeds of
                                        this offering, expected to be
                                        approximately $7,141,000, for repayment
                                        of approximately $5.1 million of debt
                                        and for working capital and other
                                        general corporate purposes.



American Stock Exchange Symbol...       CVU

Except as set forth in the financial statements or as otherwise specifically
stated, all information in this prospectus assumes:



o    No exercise of the underwriter's over-allotment option to purchase up to
     300,000 of our common shares;

o    No exercise of the underwriter's warrant to purchase up to 200,000 of our
     common shares;

o    No exercise of options granted under our stock option plans, under which
     there are an aggregate of 1,470,146 of our common shares reserved for
     issuance, and options to purchase 1,222,338 common shares outstanding at
     exercise prices from $1.20 to $8.46;



o    No exercise of warrants to purchase 37,088 of our common shares granted
     outside of our option plans, at exercise prices from $1.65 to $4.50 per
     share; and

o    No conversion of a $4.0 million principal amount promissory note,
     convertible into 333,334 common shares.

Risks

     As part of your evaluation of us, you should take into account not only our
business approach and strategy, but also the special risks we face in our
business. Because our business is substantially dependent upon contracts with
the U.S. government, we are subject to a number of risks. Some of these risks
are: the government's ability to terminate their contracts with us at any time;
the government's ability to reduce or modify its contracts if its requirements
or budgetary constraints change; the government's right to suspend or debar us
from doing business with them; and competition in the bidding process for
government contracts.

                                       4


<PAGE>


Summary Financial Information

     The summary historical financial information presented below for the years
ended December 31, 2000 and 2001, have been derived from our audited
consolidated financial statements and notes included elsewhere in this
prospectus, which have been reclassified to reflect the operations of Kolar,
Inc., as discontinued operations. The summary historical financial information
for the nine month periods ended September 30, 2001 and 2002, have been derived
from our unaudited consolidated financial statements and notes included
elsewhere in this prospectus, which have been reclassified to reflect the
operations of Kolar as discontinued operations. In our opinion the unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments, which
consist of only normal recurring adjustments, necessary for a fair presentation
of the results of operations for the periods presented.

     You should read this information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements included elsewhere in this prospectus.


<TABLE>
<CAPTION>

                                                            Fiscal Year Ended                             Nine Months Ended
                                                 ----------------------------------------   ----------------------------------------
                                                  December 31, 2000    December 31, 2001    September 30, 2001    September 30, 2002
                                                  -----------------    -----------------    ------------------    ------------------
<S>                                               <C>                  <C>                    <C>                   <C>
Statement of Operations Data:
Revenues                                              $8,261,351          $15,024,027             $10,631,958           $17,988,748
Cost of sales                                          5,676,229           10,955,264               7,015,993            12,549,892
                                                   -------------        -------------          --------------         -------------
    Gross profit                                       2,585,122            4,068,763               3,615,965             5,438,856
G&A expenses                                           1,421,758            1,479,421               1,145,607             1,800,643
                                                   -------------        -------------          --------------         -------------
    Income (loss) from operations                      1,163,364            2,589,342               2,470,358             3,638,213
Other income (expense), net                             (233,428)              (1,620)                 (9,223)                3,642
Interest expense                                        (106,157)            (155,825)               (126,707)             (331,765)
                                                   -------------        -------------          --------------         -------------
Total other income                                      (339,585)            (157,445)               (135,930)             (328,123)
Income (loss) before taxes                               823,779            2,431,897               2,334,428             3,310,090
Provision (benefit) for income taxes                    (126,000)                   0                 934,000              (529,000)
                                                   -------------        -------------          --------------         -------------
Net income (loss) from continuing operations             949,779            2,431,897               1,400,428             2,781,090
Net income (loss) from discontinued operations           979,427          (14,070,016)             (1,571,481)                    0
                                                   -------------        -------------          --------------         -------------
Net income (loss)                                     $1,929,206         ($11,638,119)              ($171,053)           $2,781,090
                                                   =============        =============          ==============         =============

Basic Income (loss) per Share:
       Income (loss) per share from continuing             $0.36                $0.92                   $0.53                 $1.03
                operations
       Income (loss) per share from                         0.37                (5.31)                  (0.59)                    0
                discontinued operations            -------------        -------------          --------------         -------------
       Income (loss) per share outstanding                 $0.73               ($4.39)                 ($0.06)                $1.03
                                                   =============        =============          ===============        =============
       Weighted average common share outstanding       2,648,509            2,653,538               2,652,355             2,704,082
                                                   =============        =============          ===============        =============

Other Financial Data:
Capital expenditures                                     $70,838              $19,307                 $14,507               $40,011
Depreciation and amortization                             30,194               35,653                  26,362                30,931
</TABLE>



     The information for September 30, 2002 includes income taxes computed at an
effective tax rate of 15.9% because we estimate we will utilize $800,000 of our
net operating loss carryforward.


                                       5
<PAGE>



     The following table summarizes our balance sheet information as of December
31, 2001 and as of September 30, 2002.  The pro forma information gives effect
to reduction of the principal and interest owed under a $4.0 million principal
amount convertible promissory note held by Ralok, Inc. which we have the right
to purchase for $2.7 million. As of September 30, 2002, there was $996,650 of
interest accrued on the note. Ralok is the entity from which we purchased the
assets of Kolar Machine, Inc.  The pro forma as adjusted information gives
further effect to our receipt of estimated net proceeds of $7,141,000 from the
sale of our common shares being offered pursuant to this prospectus and
application of such proceeds to repay approximately $5.1 million of debt.

<TABLE>
<CAPTION>

                                                         December 31, 2001                      September 30, 2002
                                                         -----------------    ------------------------------------------------------
                                                                                                                        Pro Forma
                                                              Actual                  Actual           Pro Forma       (as adjusted)
                                                              ------                  ------           ---------       -------------
<S>                                                     <C>                          <c>                <C>            <C>
Balance Sheet Data:
Working capital (deficit)                                  (2,807,657)                266,304          2,562,954           9,703,954
Total assets                                               13,830,697              14,035,432         14,035,432          15,033,396
Total liabilities                                          16,184,868              13,479,562         11,182,912           5,039,876
Shareholders' equity (deficit)                             (2,354,171)                555,870          2,852,520           9,993,520

</TABLE>

















                                       6


<PAGE>

                                  Risk Factors

     Before making an investment in our common shares, you should consider
carefully the risk factors described below, as well as the other
information appearing in this prospectus, including the financial statements and
related notes.


                          Risks related to our business



We depend on government contracts for most of our revenues.

     We are a supplier, either directly or as a subcontractor, to the U.S.
government and its agencies, principally the U.S. Air Force. All of our revenues
for 2002 and 92% of our revenues for 2001 were derived from government contract
sales. One of our contracts, for the T-38 "Talon", accounted for 29.5% of our
revenue for 2002. We depend on these government contracts for most of our
business. If we are suspended or debarred from contracting with the U.S.
government, if our reputation or relationship with individual federal agencies
were impaired, or if the government otherwise ceased doing business with us or
significantly decreased the amount of business it does with us, our business,
prospects, financial condition and operating results would be materially
adversely affected.

We face risks relating to government contracts.

     There are inherent risks in contracting with the U.S. government, including
risks that are peculiar to the defense industry, which could have a material
adverse effect on our business, prospects, financial condition and operating
results. All contracts with the U.S. government contain provisions and are
subject to laws and regulations that give the government rights and remedies not
typically found in commercial contracts, including rights that allow the
government to:

     o    terminate contracts for convenience in whole or in part at any time;

     o    reduce or modify contracts or subcontracts if its requirements or
          budgetary constraints change;

     o    cancel multi-year contracts and related orders if funds for contract
          performance for any subsequent year become unavailable;

     o    adjust contract costs and fees on the basis of audits completed by its
          agencies;

     o    claim rights in products and systems produced by us;

     o    suspend or debar us from doing business with U.S. government; and

     o    control or prohibit the export of our products.


     If the U.S. government terminates a contract for convenience, we may
recover only our incurred or committed costs, settlement expenses and profit on
work completed prior to the termination. If the government terminates a contract
for default, we may not recover even those amounts, and instead may be liable
for excess costs incurred by the government in procuring undelivered items and
services from another source.

We have risks associated with competing in the bidding process for U.S.
government contracts.

     We obtain many of our U.S. government contracts through a competitive
bidding process. In the bid process, we face the following risks:

     o    We must bid on programs in advance of their completion, which may
          result in unforeseen technological difficulties or cost overruns;

     o    We must devote substantial time and effort to prepare bids and
          proposals for competitively awarded contracts that may not be awarded
          to us; and

     o    Awarded contracts may not generate sales sufficient to result in
          profitability.


                                       7
<PAGE>

We are subject to strict governmental regulations relating to the environment
which could result in fines and remediation expense in the event of
non-compliance.

     We are required to comply with extensive and frequently changing
environmental regulations at the federal, state and local levels. Among other
things, these regulatory bodies impose restrictions to control air, soil and
water pollution, to protect against occupational exposure to chemicals,
including health and safety risks, and to require notification or reporting of
the storage, use and release of certain hazardous substances into the
environment. This extensive regulatory framework imposes significant compliance
burdens and risks on us. In addition, these regulations may impose liability for
the cost of removal or remediation of certain hazardous substances released on
or in our facilities without regard to whether we knew of, or caused, the
release of such substances. Furthermore, we are required to provide a place of
employment that is free from recognized and preventable hazards that are likely
to cause serious physical harm to employees, provide notice to employees
regarding the presence of hazardous chemicals and to train employees in the use
of such substances. Our operations require the use of a limited amount of
chemicals and other materials for painting and cleaning that are classified
under applicable laws as hazardous chemicals and substances. If we are found not
to be in compliance with any of these rules, regulations or permits, we may be
subject to fines, remediation expenses and the obligation to change our business
practice, any of which could result in substantial costs that would adversely
impact our business operations and financial condition.

We may be subject to fines and disqualification for non-compliance with Federal
Aviation Administration regulations.

     We are subject to regulation by the Federal Aviation Administration under
the provisions of the Federal Aviation Act of 1958, as amended. The FAA
prescribes standards and licensing requirements for aircraft and aircraft
components. We are subject to inspections by the FAA and may be subjected to
fines and other penalties (including orders to cease production) for
noncompliance with FAA regulations. Our failure to comply with applicable
regulations could result in the termination of or our disqualification from some
of our contracts, which could have a material adverse effect on our operations.

We had a shareholders' deficit and working capital deficit for December 31,
2001.

     At December 31, 2001, we had a shareholders' deficit (i.e., the amount by
which liabilities exceed assets) of approximately $2.3 million. We also had
negative working capital (the amount by which current liabilities exceed current
assets) of $2,807,657 at December 31, 2001. These types of deficits indicate
that we may not be able to pay our debts as they become due. There can be no
assurance that we will not experience such deficits again in the future.

We do not have sufficient resources available to repay our debt in full without
the proceeds from this offering, and there can be no assurance that we will
raise sufficient funds in this offering or find replacement capital, or that
additional arrangements can be made to restructure the terms of the debt.



     We currently owe several banks approximately $2,413,089 in principal
amount, payable monthly, with a final payment due on June 30, 2003, bearing
interest at the prime rate plus 3.5% per annum. The debt is secured by all of
CPI's and Kolar's assets. We also owe $4,000,000 in principal amount to Ralok
plus accrued interest of $1,131,233 as of January 31, 2003, which is due on
September 30, 2003, unless the maturity date of the bank loans is extended, in
which case the Ralok note will mature 90 days after the extended maturity
date of the bank loans, but not later than September 30, 2007. This note bears
interest at the rate of 8% per annum. At September 30, 2002, our debt to equity
ratio was 24.25 to 1. We intend to raise enough proceeds in this offering to
repay the bank loans in full and purchase the Ralok note. There can be no
assurance that we will raise enough proceeds in this offering to repay our debt,
and if we do not, we may not be able to make additional arrangements to
restructure the terms of the debt or to find replacement capital, to repay our
debt. If we do not repay our debt when due, the banks will be entitled to
foreclose on their security interest and sell our assets.




                                       8
<PAGE>

Our debt facilities contain restrictive covenants which may adversely affect us.

     The debt facilities contain restrictive covenants which, among other
things, restrict us from:

     o    incurring additional debt;
     o    incurring liens;
     o    paying dividends;
     o    making certain other restricted payments or investments;
     o    consummating certain asset sales;
     o    entering into certain transactions with affiliates; and
     o    merging or consolidating with another entity.

     The debt facilities also require us to maintain specified financial
ratios and satisfy certain financial tests, including ratios and tests relating
to consolidated tangible net worth, fixed charges coverage ratios, consolidated
net income and earnings before interest, taxes, depreciation and amortization
(EBITDA). Our ability to meet the financial ratios and tests may be affected by
events beyond our control. A breach of any of these covenants could result in an
event of default under the debt facilities. As of December 31, 2002, we were in
compliance with all of our covenants. If an event of default occurs, the lenders
are permitted to accelerate the debt and demand repayment in full. If we do not
repay our debt when due, the banks will be entitled to foreclose on their
security interest and sell our assets. In that event, our assets subject to the
security interest could be sold, and we might have to curtail our operations.

If the contracts associated with our backlog were terminated, our financial
condition would be adversely affected.

     The maximum contract value specified under each government contract that we
enter into is not necessarily indicative of the revenues that we will realize
under that contract. Because we may not receive the full amount we expect under
a contract, we may not accurately estimate our backlog because the actual
accrual of revenues on programs included in backlog may never occur or may
change. Cancellations of pending contracts or terminations or reductions of
contracts in progress could have a material adverse effect on our business,
prospects, financial condition or results of operations.  As of December 31,
2002, our backlog was $70,735,023, of which 27% was funded and 73% was unfunded.

We may be unable to retain personnel who are key to our operations.

     Our success, among other things, is dependent on our ability to attract and
retain highly qualified senior officers and engineers. Competition for key
personnel is intense. Our ability to attract and retain senior officers and
experienced, top rate engineers is dependent on a number of factors, including
prevailing market conditions and compensation packages offered by companies
competing for the same talent. The inability to hire and retain these persons
may adversely affect our production operations and other aspects of our
business.

                          Risks related to the offering

The market price of our common shares is highly volatile.

     The market price of our common shares has been highly volatile and may
continue to be volatile in the future. As a result of our share price
volatility, it is difficult to determine the true market value of our company.

Investors in this offering may experience dilution upon the exercise of options
and warrants.



     We currently have outstanding options and warrants to purchase 1,194,004 of
our common shares. There are 276,142 common shares available under our existing
equity performance plans that may be subject to future awards. Upon consummation
of this offering, the underwriter will be issued a warrant to purchase up to
200,000 common shares. On April 1, 2003, we will grant options to purchase an
aggregate of 30,000 common shares to our non-employee directors. Investors in
this offering may experience a reduction in percentage ownership of the company
and dilution in the net tangible book value of their investment upon the
exercise of these outstanding options and warrants and any we may issue in the
future.



                                       9
<PAGE>

There could be substantial sales of our common shares after the expiration of
lock-up periods, which could cause the price of our common shares to fall.



     After the offering, 4,805,668 of our common shares will be outstanding. Of
the common shares outstanding after the offering, the resale of 311,618 shares
will be restricted under lock-up agreements that restrict the holders' ability
to transfer our shares for at least 13 months after the date of this prospectus,
except that the underwriter has agreed that Mr. Arthur August may adopt a plan
under Rule 10b5-1 of the Securities Exchange Act of 1934, pursuant to which he
can sell up to 10,000 of his common shares per month during the lock-up period
commencing three months after the date of this prospectus. Most of the remaining
outstanding shares may be sold freely without restriction. Our underwriter may
in its sole discretion waive or permit us to waive the lock-up at any time for
any shareholder. Moreover, all of the shares underlying our outstanding options
have been registered and may be sold freely immediately after they are
exercised. Sales of a substantial number of our common shares could cause the
price of our securities to fall. Additionally, these sales could impair our
ability to raise capital by selling additional securities.



A significant amount of the proceeds from this offering will not be used grow
our business.



     Approximately 72% of the net proceeds to be received by us in connection
with this offering will be allocated to debt repayment, with the balance
allocated to working capital and other general corporate purposes. Accordingly,
there will not be a significant amount of funds available to assist in the
growth of our business.



Provisions of our certificate of incorporation, by-laws and New York laws may
prevent a change in control even if such change of control would result in an
increase in our share price.

     New York law. We are subject to Section 912 of the New York Business
Corporation Law. In general, Section 912 prohibits a publicly held New York
corporation from engaging in a business combination with an interested
shareholder (a person who owns, or within five years did own, 20% or more of the
corporation's voting shares) for a period of five years after the date of the
transaction in which the person became an interested shareholder unless, prior
to such date, the corporation's board of directors approved either the business
combination or the transaction which resulted in the shareholder becoming an
interested shareholder.

     Certificate of incorporation and bylaws. Our certificate of incorporation
provides for a board of directors divided into three classes, each of which
generally serves for a term of three years, with only one class of directors
being elected each year. A shareholder entitled to vote for the election of
directors may nominate a person or persons for election as director only if
written notice of such shareholder's intent to make such nomination is given to
our secretary not later than 120 days in advance of the meeting. Our certificate
of incorporation and by-laws do not provide for cumulative voting rights. This
means that holders of a majority of our capital shares who vote in the election
of directors can elect all of the directors and, in such event, the holders of
the remaining shares will not be able to elect any of our directors.

     Our certificate of incorporation provides that shareholder actions by
consent require the consent of all of our shareholders. This has the effect of
delaying the ability of a majority shareholder to acquire control of our board
of directors.

     We are authorized to issue up to 5,000,000 preferred shares. These shares
may be issued in one or more series and our board of directors may determine the
terms of any shares of newly issued preferred shares at the time of issuance,
without further shareholder action. These terms may include voting rights
(including the right to vote as a series on particular matters), preferences as
to dividends and liquidation, conversion and redemption rights and sinking fund
provisions. Any issuance of our preferred shares, depending upon the rights,
preferences and designations of these shares, may delay, deter or prevent a
change in control of our company, or could result in the dilution of the voting
power of any of our common shares you purchase in the offering. We have no
present plans to issue any preferred shares.

                           Forward-Looking Statements

     This prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to

                                       10

<PAGE>


our financial condition, results of operations and business. The words
"anticipate," "believe," "estimate," "expect," "plan," "intend" and similar
expressions, as they relate to us, are intended to identify forward-looking
statements. Such statements reflect our current views with respect to future
events and are subject to certain risks, uncertainties and assumptions. We
cannot assure you that any of our expectations will be realized. Factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements include, without limitation, our ability to service
our debt or to obtain financing, our ability to win government contract awards
and to attract and retain a sufficient revenue-generating customer base, and
general economic conditions.

                                       11
<PAGE>


                                 Use of Proceeds



     We expect the net proceeds of this offering to be approximately $7,141,000.
If the underwriter exercises its right to purchase an additional 300,000
shares, the net proceeds will be approximately $8,275,750. These estimates
assume that the public offering price is $4.25 per share. We compute net
proceeds by deducting the underwriting discount and our estimated offering
expenses from the total offering price.



     We intend to use the net proceeds of this offering as follows:

     o    $2.7 million to purchase a note held by Ralok, Inc. in the principal
          amount of $4 million, which is currently accruing interest at the rate
          of 8% per annum and matures on September 30, 2003;



     o    repayment of $2,413,089 million in principal amount of bank
          loans, which bears interest at the prime rate plus 3.5%
          per annum and matures on June 30, 2003; and

     o    approximately $2 million for working capital.



     Our agreement with the banks obligates us to use the net proceeds of this
offering to pay the bank loans in full. In November 2002, we entered into an
agreement with Ralok that grants us the right to purchase the Ralok note,
including all principal and accrued interest, for an aggregate purchase price of
$2.7 million, at any time until April 30, 2003. We are obligated to purchase the
Ralok note if the net proceeds of this offering are at least $4 million.

     Unforeseen events, unexpected expenses, delays and other matters may make
it necessary to reallocate or revise the anticipated uses and amounts set forth
above. Although there are no current plans to do so, our board of directors
reserves the right, in the exercise of its business judgment, to alter the
estimates and anticipated uses set forth herein.











                                       12
<PAGE>


                                 Capitalization

     The following table sets forth our cash and capitalization:

     o    on an actual basis as of September 30, 2002;



     o    on a pro forma basis reflecting a gain of approximately $2.3 million
          as a result of the reduction of the principal and interest owed under
          a $4.0 million principal amount convertible promissory note held by
          Ralok, Inc., which we have the right to purchase for $2.7 million. As
          of September 30, 2002, there was $996,650 of interest accrued on the
          note; and

     o    on an as adjusted basis reflecting the sale of common shares in this
          offering and application of such proceeds to repay approximately $5.1
          million of debt.



     You should read this table in conjunction with the financial statements
beginning on page F-1 of this prospectus.


<TABLE>
<CAPTION>

                                                                                     September 30, 2002
                                                              -------------------------------------------------------------
                                                                                                              Pro forma
                                                                     Actual              Pro forma           as adjusted
                                                                     ------              ---------           -----------
<S>                                                               <C>                <C>                     <C>
Cash, cash equivalents and short-term investments                 $    121,002       $     121,002             1,118,966
Property and equipment, net                                            110,340             110,340               110,340
Total current assets                                                13,745,866          13,745,866            14,743,830
                                                                   ===========          ==========            ==========

Liabilities and shareholders' equity:
Debt and capital lease obligations:
     Note payable-Seller                                             8,311,782           6,015,132                 -0-
     Capital lease obligations (including current portion)             127,904             127,904                 -0-
                                                                   -----------          ----------            ----------
     Total debt and capital lease obligations                        8,439,686           6,143,036                 -0-
                                                                   -----------          ----------            ----------

Shareholders' equity (deficit):

     Common shares--$.001 par value, authorized 50,000,000
     shares, issued and outstanding 2,755,670; preferred
     shares, authorized 5,000,000 shares, none issued and
     outstanding                                                         2,756               2,756                 4,756
     Additional paid-in-capital                                     12,495,872          12,495,872            19,634,872
     Accumulated deficit                                           (11,942,758)         (9,646,108)           (9,646,108)
                                                                   -----------          ----------            ----------
     Total shareholders' equity                                        555,870           2,852,520             9,993,520
                                                                   -----------          ----------            ----------

     Total capitalization                                            8,995,556           8,995,556             9,993,520
                                                                   ===========          ==========            ==========
</TABLE>







                                       13
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                           and Results of Operations

     You should read the financial information set forth below in conjunction
with our financial statements beginning on page F-1. Except as otherwise
indicated, the following discussion does not include the results of operations
of Kolar, Inc., which have been reclassified as discontinued operations.

Critical Accounting Policies

     Revenue Recognition

     We recognize revenue from our contracts over the contractual period under
the percentage-of-completion (POC) method of accounting. Under the POC method of
accounting, sales and gross profit are recognized as work is performed based on
the relationship between actual costs incurred and total estimated costs at the
completion of the contract. Recognized revenues that will not be billed under
the terms of the contract until a later date are recorded as an asset captioned
"Costs and estimated earnings in excess of billings on uncompleted contracts."
Contracts where billings to date have exceeded recognized revenues are recorded
as a liability captioned "Billings in excess of costs and estimated earnings on
uncompleted contracts." Changes to the original estimates may be required during
the life of the contract. Estimates are reviewed monthly and the effect of any
change in the estimated gross margin percentage for a contract is reflected in
cost of sales in the period the change becomes known. The use of the POC method
of accounting involves considerable use of estimates in determining revenues,
costs and profits and in assigning the amounts to accounting periods. We
continually evaluate all of the issues related to the assumptions, risks and
uncertainties inherent with the application of the POC method of accounting.

     Income Taxes

     We account for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes." Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. We record a valuation allowance that represents federal
and state operating loss carryforwards for which utilization is uncertain.
Management judgment is required in determining our provision for income taxes,
deferred tax assets and liabilities and the valuation allowance recorded against
our net deferred tax assets. The valuation allowance would need to be adjusted
in the event future taxable income is materially different than amounts
estimated. We have recorded valuation allowances of $4,487,000 and $2,074,000
against our deferred tax assets at September 30, 2002 and December 31, 2001,
respectively.

Results of Operations

     Nine Months Ended September 30, 2002 as Compared to the Nine Months Ended
September 30, 2001

     Revenue. Our revenue for the nine months ended September 30, 2002 was
$17,988,748 compared to $10,631,958 for the same period last year, representing
an increase of $7,356,790 or 69%, which was due to our receipt of more contract
awards in 2002.

     Gross profit. Gross profit for the nine months ended September 30, 2002 was
$5,438,856, compared to $3,615,965 for the same period last year, an increase of
$1,822,891 or 50%. Gross profit as a percentage of revenue for the nine months
ended September 30, 2002 was 30% compared to 34% for the same period last year
due primarily to a less profitable sales mix.



     Selling, general and administrative expenses. Selling, general, and
administrative expenses for the nine months ended September 30, 2002 were
$1,800,643, compared to $1,145,607 for the same period last year, an increase of
$655,036, or 57%. This increase is largely due to legal fees associated with the
discontinuance of Kolar's operations and restructuring our existing debt.
Interest expense for the nine months ended September 30, 2002 was $331,765,
compared to $126,707 for the same period last year, an increase of $205,058, or
162%. The increase in interest expense results from the fact that interest for
the previous year was included in Kolar's income (loss) from operations prior to
discontinuance of Kolar's operations.

     Income from continuing operations. Income from continuing operations for
the nine months ended September 30, 2002 was $2,781,090 compared to $1,400,428
from continuing operations for the same period last year, an increase of
$1,380,662, or 99%. The 2002 results include income taxes computed at an
effective tax rate of 15.9% because we estimate that we will utilize $800,000 of



                                       14
<PAGE>



our net operating loss carryforward. Basic income per share was $1.03 on an
average of 2,704,082 shares outstanding, compared to $.53 per share from
continuing operations on an average of 2,652,355 shares outstanding for the nine
months ended September 30, 2001.



     Year Ended December 31, 2001 as Compared to the Year Ended December 31,
2000

     Revenue. Our revenue for the year ended December 31, 2001 was $15,024,027
compared to $8,261,351 for the year ended December 31, 2000, representing an
increase of $6,762,676, or 82%, which is due to our receipt of more contract
awards in 2001.

     Gross profit. Gross profit for 2001 was $4,068,763 compared to $2,585,122
for 2000, representing an increase of $1,483,641. Gross profit as a percentage
of revenue for 2001 was 27%, compared to 31% for 2000. The reduction in gross
profit percentage is due primarily to a less profitable sales mix.

     Selling, general and administrative expenses. Selling, general and
administrative expenses for 2001 were $1,479,421 compared to $1,421,758 for
2000, representing an increase of $57,663. This increase is primarily
attributable to the increased level of sales. Selling, general and
administrative expenses as a percentage of revenue for 2001 and 2000 were 10%
and 17%, respectively. Interest expense for 2001 was $155,825, compared to
$106,157 for 2000, representing an increase of $49,668, due to draw-downs on our
line of credit.

     Income from continuing operations. Net income from continuing operations
was $2,431,897 for 2001 compared to $949,779 for 2000, representing an increase
of $1,482,118, or 156%, due to the increased level of revenue.

     Including the operations of our discontinued Kolar subsidiary, the net loss
for 2001 was $11,638,119 compared to net income of $1,929,206 for 2000,
representing a decrease in net income of $13,567,325, which was primarily due to
the liquidation of Kolar. Basic loss per share was $4.39 on 2,653,538 average
shares outstanding compared to net income of $0.73 on 2,648,509 average shares
outstanding for fiscal 2000.

     Anticipated Results of Operations for Year Ended December 31, 2002 as
Compared to Year Ended December 31, 2001

     We expect that revenue will be approximately $24 million for the year
ending December 31, 2002, compared to $15,024,027 for the year ended December
31, 2001, representing an increase of approximately $9.0 million, or
approximately 60%. This is due to an increase in government contracts awarded to
us in 2002, which trend we expect to continue into 2003. Because we expect to
utilize approximately $1,600,000 million of our net operating loss carryforward,
we expect basic earnings per share for the year to be in excess of $1.50.

Liquidity and Capital Resources

     General

     At September 30, 2002 we had working capital of $266,304 compared to a
deficiency of $2,807,657 at December 31, 2001, an increase of $3,073,961. This
increase is primarily attributable to an increase in costs and estimated
earnings in excess of billings on uncompleted contracts of approximately
$3,250,000.

     Net cash used in operating activities for the nine months ended September
30, 2002 was $74,762. This decrease in cash was primarily the result of cash
being used for new contracts of $3,247,461.

     On a rolling basis, there is a portion of our "costs and estimated earnings
in excess of billings on uncompleted contracts" that we do not expect to be able
to collect within the next year.  The amount not expected to be collected within
one year was approximately $1,203,000 at December 31, 2001 and approximately
$1,137,000 at September 30, 2002.  These amounts relate to the start up expenses
incurred in 1989 and 1990, in the early stages of our one remaining commercial
contract.  As we near the completion of this contract, we will bill and collect
more than our expenses.  Thus, we anticipate that the amount not expected to be
collected within one year will continue to decrease through the completion of
this contract, now estimated to be late 2004 or early 2005.


                                       15
<PAGE>

     Financing Arrangements



     At December 31, 2001, Kolar was in default under its debt facilities with
JPMorgan Chase Bank (formerly known as Chase Manhattan Bank) and GE Capital CFE,
Inc. (as assignee of Mellon Bank, N.A.) and its convertible note with Ralok,
Inc. The debt was guaranteed by CPI and secured by all of CPI and Kolar's
assets. In December 2001, we discontinued Kolar's operations and began the
process of liquidating its assets. The proceeds from the auction of Kolar's
machinery and equipment and the sale of its real estate, which are estimated to
be an aggregate of $860,000, are being used to pay a portion of the debt owed to
the bank lenders. The proceeds of the sales, however, are not sufficient to
provide for payment in full of all of Kolar's bank debt. From April 2002 through
January 2003, we issued an aggregate of 70,000 of our common shares to Chemical
Investments, Inc. (as designee of JPMorgan Chase) and 20,000 common shares to GE
Capital CFE, Inc. (as designee of Mellon Bank, N.A.) as consideration for their
agreement to extend the due date of the loan and for their services in
connection with amending the loan documents.

     In June 2002, CPI restructured the debt with the banks and Ralok. As
restructured, we currently owe the banks approximately $2,413,089 in principal
amount bearing interest at the prime rate plus 3.5% per annum, with a final
payment due on June 30, 2003. Additionally, we agreed that if any portion of the
loans currently held by GECapital CFE, Inc. in the principal amount of
approximately $747,442 are not repaid or refinanced in their entirety by the
dates set forth below, we would pay loan fees in the following amounts:



     o    on or before September 30, 2002, a fee of $25,000;
     o    on or before December 31, 2002, a fee of $50,000;
     o    on or before March 31, 2003, a fee of $100,000; and
     o    on or before June 30, 2003, a fee of $150,000.

     We paid the $25,000 fee due on September 30, 2002 and the $50,000 fee
due on December 31, 2002. Our agreement with the banks also obligated us to use
the net proceeds of this offering first to pay the bank loans in full.



     We also amended the $4,000,000 principal amount convertible promissory note
held by Ralok, which bears interest at a rate of 8% per annum and which was
originally due on June 30, 2002. As amended, the note will mature on September
30, 2003, unless the maturity date of the bank loans is extended, in which case
the Ralok note will mature 90 days after the extended maturity date of the bank
loans, but not later than September 30, 2007. The Ralok note is secured by a
security interest in all of our assets that is subordinate to the security
interest of the bank lenders. The principal amount of the note is currently
convertible, at Ralok's option, into 333,334 of our common shares. Pursuant to
the terms of the subordination agreement between the bank lenders and Ralok,
Ralok is prohibited from receiving current payments of interest on its note.
Until repaid, it will continue to accrue interest, which will be compounded
monthly and paid at maturity together with the principal amount. As of January
31, 2003, there was $1,131,233 of accrued interest on the note. In November
2002, we entered into an agreement with Ralok which grants us the right to
purchase the Ralok note, including all principal and accrued interest, at any
time until April 30, 2003, for an aggregate purchase price of $2.7 million. If
the net proceeds of this offering are at least $4 million, we are obligated to
purchase the Ralok note.



     We intend to raise enough proceeds in this offering to repay the bank loans
in full and purchase the Ralok note. We intend to obtain a credit line then for
working capital on terms more favorable to us than our existing bank loans,
although we have no agreements currently in place for such credit line. If we do
not raise enough proceeds to repay our existing debt, we intend to extend or
refinance it. We have had preliminary discussions with financing institutions
which have led us to believe that, in such event, we should be able to extend or
refinance our existing debt. However, we cannot assure you that we will be able
to make additional arrangements to restructure the terms of the debt or to find
replacement capital.


                                       16
<PAGE>


     Upon successful completion of this offering and repayment of our
outstanding debt, we believe our resources will be sufficient to meet our
current working capital needs for at least the next 12 months. If we do not
raise enough proceeds in this offering to repay our existing debt, we believe
our current level of operations and existing net assets will be sufficient to
fund our operations through June 30, 2003, the due date of substantially all of
our bank debt.

     In September 2002, we engaged a broker/dealer to act as placement agent to
raise money for us on a private placement basis. In October 2002, we, together
with the placement agent, met with several investors to discuss the prospect of
raising approximately $7.5 million through a private offering of our common
shares. The proceeds of the private placement would have been used for the same
purposes that we intend to use the proceeds of this offering. On October 25,
2002, we terminated our relationship with this broker/dealer and abandoned our
private placement efforts. No offers to buy or indications of interest from
investors were ever accepted. This prospectus supersedes any materials that may
have been given to prospective investors in connection with the private
placement.

     The table below summarizes information about our contractual obligations as
of September 30, 2002 and the effects these obligations are expected to have on
our liquidity and cash flow in the future years.


<TABLE>
<CAPTION>

- --------------------------------------------- --------------------------------------------------------------------------------------
          Contractual Obligations                                            Payments Due By Period ($)
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
                                                   Total          Less than 1 year       1-3 years         4-5 years   After 5 years
<S>                                           <C>                <C>                   <C>               <C>             <C>
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
Short-Term Debt                                  8,213,167         8,006,046              117,739           89,382             0
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
Capital Lease Obligations                          127,904           127,904                    0                0             0
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
Operating Leases                                         0                 0                    0                0             0
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
Employment Agreement Compensation*               1,707,205           574,175              815,030          183,000       135,000
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
Total Contractual Cash Obligations              10,048,276         8,708,125              932,769          272,382       135,000
- --------------------------------------------- ----------------- --------------------- ----------------- -------------- -------------
</TABLE>

*    The employment agreements provide for bonus payments that are excluded
     from these amounts.

     Inflation

     Inflation has historically not had a material effect on our operations.




















                                       17
<PAGE>
                                    Business

General

     CPI Aerostructures, Inc. is engaged in the contract production of
structural aircraft parts principally for the United States Air Force and other
branches of the U.S. armed forces. We also provide aircraft parts to the
commercial sector of the aircraft industry but, due to the soft global economy,
we believe that significantly weaker business prospects exist in this sector.
Our strategy for growth includes de-emphasizing our commercial operations and
concentrating on government and military sales. All of our revenues for 2002 and
92% of our revenues for 2001 were derived from government contract sales. CPI
was awarded approximately $24.5 million in new contract awards in 2002, a 28%
increase over 2001. This marks the sixth consecutive year in which CPI has shown
double-digit growth in contract awards.



     We operate as a "mini-prime" contractor supplying structural aircraft parts
under prime contracts with several branches of the U.S. Government. In that
capacity, we deliver skin panels, leading edges, flight control surfaces, engine
components, wing tips, cowl doors, nacelle assemblies and inlet assemblies for
military aircraft such as the C-5A "Galaxy" cargo jet, the T-38 "Talon" jet
trainer, the C-130 "Hercules" cargo jet, the A-10 "Thunderbolt" or "Warthog"
attack jet and the E-3 "Sentry" AWACS jet. We also supply commercial aircraft
products including aprons and engine mounts, which attach jet engine housings to
aircraft such as the Lear 60 and Astra Galaxy business jets. Our products are
sub-assemblies, a series of parts fixed together to form a larger unit that will
comprise a part of a complex aerodynamic structure. In conjunction with our
assembly operations, we provide engineering, technical and program management
services to our customers.



     Due to budget constraints in the mid to late 1990's, the Clinton
Administration closed several military installations and as a result began
outsourcing many functions, including the assembly of aircraft structural
component parts into subassemblies. Until then, the military had performed this
function internally. The ability to manage the bidding process, subcontract
production of components and assemble components into subassemblies is our core
competency and the government's decision to outsource this function has resulted
in increased business opportunities for us. Fueled by new defense contract
awards, our revenue has grown significantly over the past few years. Our revenue
growth has averaged 41% per annum since 1997. From 1997 through 2002, the dollar
value of defense contracts awarded to us has increased at a compounded annual
growth rate of 53%.

     CPI has 22 years experience as a prime contractor, completing over 1,100
contracts to date. Most members of our management team have held management
positions at large defense contractors, including Grumman, Lockheed and
Fairchild. Our technical team possesses extensive technical expertise and
program management, and integration capabilities. Our competitive advantage lies
in our ability to offer large contractor capabilities with the flexibility and
responsiveness of a small company, while staying competitive in cost and
delivering superior quality products. While the larger prime contractors compete
for significant modification awards and subcontract components to other
suppliers, they generally do not compete for awards for smaller modifications or
spares and repair parts, even for planes for which they are the original
manufacturer. We also qualify as a small business because we have less than
1,000 employees, and this allows us to compete on military awards set aside for
companies with this small business status.

     While historically the majority of our contracts are valued below $200,000
we have recently competed for, and were awarded, significantly larger contracts,
including an estimated $61 million award for the T-38 "Talon" jet trainer. We
intend to continue to bid on these larger contracts. We believe that our
improved financial condition as a result of this offering and our success with
the T-38 program will allow us to compete more effectively for larger awards in
the future.

Significant Contracts

     The ongoing maintenance of existing aircraft by the U.S. Air Force is the
primary driver of our growth in both the number of contracts and the size of
awards. Our contracts with the Air Force accounted for substantially all of our
revenue for 2001 and 2002, respectively. In most cases the contracts relate to
an aircraft that is no longer being manufactured and is required to be
maintained for a number of years. CPI has been awarded contracts within these
maintenance programs on the C-5A, T-38 and E-3 aircraft. The following are
current Department of Defense (DOD) budget amounts for 2003 program spending on
these aircraft:


                                       18
<PAGE>


         Aircraft          2003 Program Spending *
         --------          -----------------------
         C-5A              $363,803,000
         T-38              $168,112,000
         E-3               $ 29,478,000

         * Source:  Department of Defense

     The C-5A "Galaxy" cargo jet is one of the largest aircraft in the world and
can carry a maximum cargo load of 270,000 pounds. Lockheed delivered the first
C-5A in 1970. The C-5A Galaxy carries fully equipped combat-ready military units
to any point in the world on short notice and then provides field support to
sustain the fighting force. The Air Force has created a comprehensive program to
ensure the capabilities of its C-5A fleet until 2040. We are one of the leading
suppliers of structural spare parts and assemblies for the C-5A aircraft. We
assemble numerous C-5A parts, including panels, slats, spoilers and wing-tips
and are the only supplier of C-5A wing-tips to the U.S. government. Like the
C-5A itself, the wing-tip is a large structure and is expensive -- up to
$750,000 for each replacement piece. Our first C-5A contract was $589,908 of
structural spares and was awarded in 1995. Since then we have received awards
aggregating approximately $36 million. C-5A contracts accounted for 50.3% of our
revenues for 2002.

     The T-38 "Talon" is a twin-engine, high-altitude, supersonic jet primarily
used for pilot training. The Talon first flew in 1959. More than 1,100 were
delivered to the Air Force between 1961 and 1972, when production ended. There
are approximately 500 T-38's in active service with the Air Force. The Air Force
has a program designed to extend the structural life of the T-38 until 2020. In
2001, we were awarded a ten-year contract to build the structural inlets for the
T-38 Propulsion Modification Program. The T-38 contract is the largest in our
history, worth an estimated $61 million over the ten-year life of the program.
The length and size of this program allow us to develop a long-term backlog and
establish ourselves as a successful prime contractor for larger and longer term
programs.  The T-38 contract accounted for 29.5% of our revenues for 2002.

     The E-3 "Sentry" is an airborne warning and control systems (AWACS)
aircraft that provides all-weather surveillance, command, control and
communications to the U.S., NATO and other allied air defense forces. The E-3 is
used primarily by the United States and NATO to detect, identify and track
airborne enemy forces. It is the premier air battle command and control aircraft
in the world today. Boeing delivered the first E-3 in 1977 and there are
approximately 30 E-3 aircraft in active service with the Air Force. We currently
have contract awards on the E-3 aggregating approximately $4.9 million. We make
nose cowlings, skin panels and pan, rod, brace and seal assemblies for the E-3.
E-3 contracts accounted for 6.4% of our revenues for 2002.

Sales and Marketing

     We obtain all of our military contracts for our products and services
through the process of competitive bidding. While historically the majority of
our contracts have been valued below $200,000, we have successfully competed for
and have been awarded significantly larger contracts. Our average sales cycle,
which generally commences at the time a prospective customer issues a request
for proposal and ends upon execution of a contract with the customer, typically
ranges from six months to one year. Our military customers have included Defense
Supply Center Richmond, Wright-Patterson Air Force Base (AFB), Warner Robins
(AFB), Tinker (AFB), NAVICP, Hill (AFB), U.S. Army, and Redstone. Our commercial
customers have included B.F. Goodrich (Rohr), Northrop Grumman, Lockheed Martin,
Nordam, Shinmaywa, and Derco.

     We use third party service providers to help locate small government
contracts that are regularly posted by the various defense logistic agencies.
The service providers screen contracts according to the criteria set by us and
forward matching contracts to us. We then view the relevant contracts directly
on the government websites and choose the contracts on which we will bid. We
generally bid on 40 to 50 contracts per week. Over the past three years, we have
been awarded approximately 10% of the contracts on which we have bid.

     We qualify for small business status because we have less than 1,000
employees. The military's Fiscal Year 2002 program goals for small business
prime contracting were 23%, with 40% for subcontracting. Approximately 20% of
the value of our current contracts were awarded to us under this program.

     The U.S. Air Force operates three Air Logistics Centers (ALC) through
which it purchases all structural replacement and modification parts. Each ALC
is located on a domestic Air Force base and is responsible for the repair and
modification of different aircraft. Parts worn out through the normal course of
operation and discarded instead of repaired are ordered through the centralized
Defense Supply Center Richmond (DSCR). We use on-site consultants at each ALC
and the DSCR to help in the procurement process. They are important as
relationship managers and typically have previous experience on the procurement
side. The consultants provide feed back and keep us alerted to large contracts


                                       19
<PAGE>

that might be on the horizon. Additionally, we signed agreements with a number
of sales representatives to market our products to a broader base of customers.

The Market



     During most of the 1990's, defense spending was basically flat or
experienced a slight decline. In contrast, the defense budget in the current
decade has been increasing. The 2001 budget proposal for the Department of
Defense was for $277.5 billion, with actual outlays of $296.3 billion. The 2002
proposal was for $310.5 billion, which was amended and increased by $18.4
billion to bring the total 2002 Department of Defense budget to $328.9 billion.
The Bush Administration's 2003 budget proposal is $369 billion. Of the various
branches of the military, the Air Force budget would rise the most in 2003, by
12.7%, to $107 billion. According to DoD budget documents, U.S. defense spending
is projected to increase steadily in the next five years, eventually reaching
$451.4 billion in 2007.

     The amount spent by the U.S. Air Force for aircraft procurement was
approximately $9.9 billion in 2001 and $10.493 billion in 2002. The Air Force is
estimating it will spend over $12.067 billion for aircraft procurement in 2003.
Procurement includes the acquisition of new aircraft, aircraft modification
programs, and spending on spare and repair parts. Extensive modification
programs are being implemented to increase the service life of aircraft, as some
are no longer being newly manufactured. As aging aircraft are being maintained,
support for aging aircraft, including spare parts and assemblies, is also
required. The chart below breaks down the $12.067 billion estimated to be spent
by the U.S. Air Force in 2003 for aircraft modification programs, spare and
repair parts, support and procurement of new aircraft.



                       2003 Air Force Procurement Budget
                                ($ in Millions)

        Aircraft:                               9267.4
        Modification of Inservice Aircraft:     1776.6
        Support:                                747.4
        Spare and Repair Parts:                 276



*Source:   Department of Defense



Backlog

     We produce custom sub-assemblies pursuant to long-term contracts and
customer purchase orders. Backlog consists of aggregate values under such
contracts and purchase orders, excluding the portion previously included in
operating revenues on the basis of percentage of completion accounting, and
including estimates of future contract price escalation. Substantially all of
our backlog is subject to termination at will and rescheduling, without
significant penalty. Congress often appropriates funds for a particular program
or contract on a yearly or quarterly basis, even though the contract may call
for performance that is expected to take a number of years. Therefore, our
funded backlog does not include the full value of our contracts because Congress
often appropriates funds for a particular program or contract on a yearly or
quarterly basis, even though the contract may call for performance that is
expected to take a number of years. Our backlog as of December 31, 2001 and
December 31, 2002, is as follows:

                                       20
<PAGE>



    Backlog                December 31, 2001               December 31, 2002
    -------             ------------------------         ---------------------
    Funded                    12,904,661                      19,172,232
    Unfunded                  57,043,935                      51,672,791
                              ----------                      ----------
    Total                     69,948,596                      70,735,023

     Of the total amount of our backlog at December 31, 2001, approximately 95%
was attributable to military contracts. Approximately $16.8 million (88%) of the
funded backlog at December 31, 2002 is scheduled for delivery during 2003.

Material and Parts

     We subcontract production of substantially all component parts incorporated
into our products to third party manufacturers under firm fixed price orders.
Our decision to purchase certain components generally is based upon whether the
components are available to meet required specifications and at a cost and
delivery consistent with customer requirements. From time to time, we are
required to purchase custom made parts from sole suppliers and manufacturers in
order to meet specific customer requirements. To date, we have not experienced
material delays in connection with obtaining custom parts and we believe that
the loss of any single supplier or manufacturer would not have a material
adverse effect on our business.

     We obtain our raw materials from several commercial sources. Although
certain items are only available from limited sources of supply, we believe that
the loss of any single supplier would not have a materially adverse effect on
our business.

Competition

     The markets for our products are highly competitive. We compete with
numerous larger, well-established prime contractors engaged in the supply of
aircraft parts and assemblies to the military, including Grumman, Lockheed,
Boeing, Nordam, and Vaught. All of these competitors possess significantly
larger infrastructures, greater resources, and the capabilities to respond to
much larger contracts. We also compete against smaller contractors such as
Aerocomponents, Aerospace Engineering and Support, GSE Dynamics, Honeycomb
Company of America, Alton Iron Works, B&B Devices, and Precision Manufacturing.



     CPI has 22 years experience as a prime contractor, completing over 1,100
contracts to date. Most members of our management team have held management
positions at large defense contractors, including Grumman, Lockheed and
Fairchild. Our technical team possesses extensive technical expertise and
program management and integration capabilities. Our competitive advantage lies
in our ability to offer large contractor capabilities with the flexibility and
responsiveness of a small company, while staying competitive in cost and
delivering superior quality products. While the larger prime contractors compete
for significant modification awards and subcontract components to other
suppliers, they generally do not compete for awards in smaller modifications,
spares and repair parts, even for planes for which they are the original
manufacturer. We believe we compete effectively against the smaller competitors
because our smaller competitors generally do not have the expertise we have in
responding to RFPs for government contracts.



     We qualify as a small business because we have less than 1,000 employees.
The military's Fiscal Year 2002 program goal for small business prime
contracting was 23%, with 40% for subcontracting. Approximately 20% of the value
of our current contracts were awarded under this program.



                                       21
<PAGE>


Government Regulation

     Environmental Regulation

     We are subject to regulations administered by the United States
Environmental Protection Agency, the Occupational Safety and Health
Administration, various state agencies and county and local authorities acting
in cooperation with Federal and state authorities. Among other things, these
regulatory bodies impose restrictions to control air, soil and water pollution,
to protect against occupational exposure to chemicals, including health and
safety risks, and to require notification or reporting of the storage, use and
release of certain hazardous chemicals and substances. The extensive regulatory
framework imposes compliance burdens and risks on us. Governmental authorities
have the power to enforce compliance with these regulations and to obtain
injunctions or impose civil and criminal fines in the case of violations.

     The Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA) imposes strict, joint and several liability on the present and
former owners and operators of facilities that release hazardous substances into
the environment. The Resource Conservation and Recovery Act of 1976 (RCRA)
regulates the generation, transportation, treatment, storage and disposal of
hazardous waste. In New York, the handling, storage and disposal of hazardous
substances is governed by the Environmental Conservation Law, which contains the
New York counterparts of CERCLA and RCRA. In addition, the Occupational Safety
and Health Act, which requires employers to provide a place of employment that
is free from recognized and preventable hazards that are likely to cause serious
physical harm to employees, obligates employers to provide notice to employees
regarding the presence of hazardous chemicals and to train employees in the use
of such substances.

     Our operations require the use of a limited amount of chemicals and other
materials for painting and cleaning, including solvents and thinners, that are
classified under applicable laws as hazardous chemicals and substances. We have
obtained a permit from the Town of Islip, New York, Building Division in order
to maintain a paint booth containing flammable liquids.

     Federal Aviation Administration Regulation

     We are subject to regulation by the Federal Aviation Administration under
the provisions of the Federal Aviation Act of 1958, as amended. The FAA
prescribes standards and licensing requirements for aircraft and aircraft
components. We are subject to inspections by the FAA and may be subjected to
fines and other penalties (including orders to cease production) for
noncompliance with FAA regulations. Our failure to comply with applicable
regulations could result in the termination or our disqualification from some of
our contracts, which could have a material adverse effect on our operations.

     Government Contract Compliance

     Our government contracts are subject to the procurement rules and
regulations of the United States government. Many of the contract terms are
dictated by these rules and regulations. During and after the fulfillment of a
government contract, we may be audited in respect of the direct and allocated
indirect costs attributed thereto. These audits may result in adjustments to our
contract costs. Additionally, we may be subject to U.S. government inquires and
investigations because of our participation in government procurement. Any
inquiry or investigation can result in fines or limitations on our ability to
continue to bid for government contracts and fulfill existing contracts.

     We believe that we are in substantial compliance with all federal, state
and local laws and regulations governing our operations and have obtained all
material licenses and permits required for the operations of our business.

Insurance

     We maintain a $2 million general liability insurance policy, a $10 million
products liability insurance policy, and a $5 million umbrella liability
insurance policy. We believe this coverage is adequate for the types of products
presently marketed because of the strict inspection standards imposed on us by
our customers before they take possession of our products. Additionally, the
Federal Acquisition Regulations generally provide that we will not be held
liable for any loss of or damage to property of the government that occurs after
the government accepts delivery of our products and that results from any
defects or deficiencies in our products unless the liability results from
willful misconduct or lack of good faith on the part of our managerial
personnel.

                                       22
<PAGE>

Proprietary Information

     None of our current assembly processes or products are protected by
patents. We rely on proprietary know-how and confidential information and employ
various methods to protect the processes, concepts, ideas and documentation
associated with our products. These methods, however, may not afford complete
protection and there can be no assurance that others will not independently
develop such processes, concepts, ideas and documentation.

Property

     CPI Aerostructures' executive offices and production facilities are
situated in an approximate 40,000 square foot building located at 200A Executive
Drive, Edgewood, New York 11717. CPI Aerostructures occupies this facility under
a five year lease which commenced in August 2002. The current monthly base rent
is $19,144, plus common area costs. We believe that our facilities are adequate
for our current needs.



     Kolar, Inc., closed all its facilities located in Ithaca, New York. Kolar
has sold one of its properties and is currently in the process of selling the
other property through a private sale.

Employees

     As of February __, 2003, CPI had __ full-time employees.



     We employ temporary personnel with specialized disciplines on an as-needed
basis. None of our employees is a member of a union. We believe that our
relations with our employees are good.















                                       23

<PAGE>


                                   Management

     Set forth below is certain information concerning each of our directors and
executive officers:


Name                        Age        Position

Arthur August..........      67        Chairman of the Board of Directors

Edward J. Fred.........      44        Chief Executive Officer, President,
                                       Acting Chief Financial Officer*,
                                       Secretary and Director

Walter Paulick.........      56        Director

Kenneth McSweeney......      71        Director



A. C. Providenti.......      65        Director**



Key Employee
- ------------

Frank Funicelli........      60        Vice President of Business Development

*    We intend to seek a Chief Financial Officer immediately following
     consummation of this offering.

**   Mr. Providenti's directorship will be effective upon consummation of the
     offering.

     Arthur August, one of our founders, has been the chairman of the board and
a director since January 1980 and was our president until December 31, 2001 and
our chief executive officer until December 31, 2002. From 1956 to 1979, Mr.
August was employed by Grumman Corporation where he last held the position of
deputy director. Mr. August holds a certificate in Aeronautical Design from the
Academy of Aeronautics, a Bachelor of Science degree in Industrial Management
from C. W. Post College, a Masters degree in Engineering from New York
University and is a graduate of the Program for Management Development at the
Harvard Graduate School of Business.

     Edward J. Fred has been an officer since February 1995. He was our
controller from February 1995 to April 1998, when he was appointed chief
financial officer. He was executive vice president from May 1, 2000 until
December 31, 2001 and was appointed to the position of president on January 1,
2002 and to the position of Chief Executive Officer on January 1, 2003. He has
also been our secretary and a director since January 1999. For approximately ten
years prior to joining our company, Mr. Fred served in various positions for the
international division of Grumman, where he last held the position of
controller. Mr. Fred holds a Bachelor of Business Administration in Accounting
from Dowling College and an Executive MBA from Hofstra University.

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

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



     A. C. Providenti will become a director upon consummation of the
offering. Since 1984, Mr. Providenti has served as president of A.C. Providenti
& Associates, Ltd., a consulting and strategic advisory firm. From 1977 to 1984,
Mr. Providenti served as senior vice president for finance and administration
and as an executive committee member for Northville Industries Corp., a



                                       24
<PAGE>


multinational petroleum storage, trading and distribution company. From 1970 to
1977, he served as chairman and president of Total Resources, Inc., a publicly
traded company initially involved in the manufacture and distribution of "unit
of use" and "unit of dose" systems for prescription drugs, which evolved into a
regional petroleum storage and distribution company. Mr. Providenti holds a
Bachelor's degree in Accounting from St. Francis College and a Masters of
Business Administration from Fordham University.

     Frank Funicelli has been with us since March 1988 and became our Vice
President of Business Development in August 2001. Prior to joining CPI, he spent
11 years at Fairchild Republic Company where he served as Chief Industrial
Engineer, Manufacturing Engineering Manager and Director of Program Planning and
Control. From 1966 to 1977 he was with Grumman Aerospace where he served as
Industrial Engineer, Manager of Manufacturing Planning and Control and Program
Planning and Resource Control Manager. Mr. Funicelli holds a Bachelor of Science
degree in Industrial Engineering from Pratt Institute and a Master of Science
in Management Engineering from C.W. Post College.

Board of Directors

     Our board of directors is divided into three classes with only one class of
directors being elected in each year and each class serving a three-year term.
The term of office of the first class of directors (Class I), consisting of
Kenneth McSweeney, will expire at our annual meeting in 2005. The term of office
of the second class of directors (Class II), consisting of Walter Paulick, will
expire at our annual meeting in 2003. The term of office of the third class of
directors (Class III), consisting of Arthur August and Edward J. Fred, will
expire at our annual meeting in 2004. We will propose that Mr. Providenti be
placed in Class I at our Annual Meeting of Shareholders in 2003.

     We have created a compensation program for our non-employee directors which
will take effect upon consummation of this offering. Under this program, each
such director will receive an annual cash fee of $5,000 (payable quarterly) and
be granted options to purchase 5,000 common shares (on April 1st of each year)
under an existing option plan. Additionally, the chairman of the Audit Committee
will be paid an additional annual cash fee of $20,000 (payable quarterly) and be
granted an additional 15,000 options. Our directors will continue to be
reimbursed for the reasonable expenses they incur in attending meetings.

Employment Agreements

     Mr. August serves as the chairman of our board and Mr. Fred serves as our
chief executive officer, president, chief financial officer and secretary. Mr.
August's employment agreement expires on December 31, 2004 and Mr. Fred's
expires on December 31, 2005. Mr. August's annual base salary is currently
$100,000. Mr. August is required to devote only such time to our business as he,
in his sole discretion, deems necessary. Mr. Fred's annual base salary is
currently $216,000 and will increase by 8% each January 1st during the contract
term. In addition to the base salary, Mr. August will receive a bonus equal to
4% of our net income for the year ending December 31, 2002; 3% for the year
ending December 31, 2003; and 2% for the year ending December 31, 2004. Mr. Fred
will receive a bonus equal to 2% of our net income for the year ending December
31, 2002; 3% for the year ending December 31, 2003; and 4% for the years ending
December 31, 2004 and 2005.

     Mr. August agreed that he would not compete with us during the term of his
employment with us and for a period of five years thereafter. As consideration
for his agreement not to compete with us for an extended period of time, we
agreed to pay Mr. August $300,000 in five, equal annual installments of $60,000
commencing on the date of termination. Mr. Fred agreed not to compete with us
during the term of his employment and for two years thereafter.

     Timothy Stone was appointed president of Kolar on July 10, 2000. Pursuant
to an employment agreement, which expires on April 30, 2003, Mr. Stone receives
an annual salary of $132,300. Mr. Stone is now overseeing the liquidation of
Kolar's assets.

                                       25
<PAGE>

Executive Compensation

     The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to us during the fiscal years ended December 31,
2002, 2001 and 2000, by our chief executive officer and our other executive
officers whose total compensation exceeded $100,000.

<TABLE>
<CAPTION>
        -------------------------- ---------------------- ------------------------ ----------------------- -------------------------
                                                                                                             Long-Term Compensation
                                                                                                              Securities Underlying
        Name/Position                      Year                   Salary                   Bonus                 Options/SARs(#)
        -------------                      ----                   ------                   -----                 ---------------
        <S>                                <C>                   <C>                    <C>                     <C>

        Arthur August                      2002                   $317,237                $180,660                    85,000
          Chairman                         2001                   $303,180                     -0-                   100,000
                                           2000                   $307,854                 $82,000                   200,000

        Edward J. Fred
          Chief Executive Officer,         2002                   $209,287                $90,330                    100,000
          President and acting Chief       2001                   $139,256                    -0-                    100,000
          Financial Officer                2000                   149,728                 $59,000                    125,000


        Timothy Stone(1)                   2002                   $140,971                     -0-                       -0-
                                           2001                   $120,016                     -0-                       -0-
        -------------------------- ---------------------- ------------------------ ----------------------- -------------------------
</TABLE>

- --------------------------------
(1)  Mr. Stone is now overseeing the liquidation of Kolar's assets and is no
     longer deemed an executive officer of our company.

Option Grants in 2001

<TABLE>
<CAPTION>
        ----------------------- -------------------------------- ------------------------------ ------------------- ----------------
                                  Number of Securities            Percent of Options Granted
                                 Underlying Options Granted(#)   to Employees in Fiscal Year(1)   Exercise Price    Expiration Date
                                 -----------------------------    --------------------------    ------------------  ----------------
                                                                                                      ($/SH)
        <S>                       <C>                             <C>                            <C>                <C>

        Arthur August                     100,000                            44.4%                    $1.20               08/11

        Edward J. Fred                    100,000                            44.4%                    $1.20               08/11
        ----------------------- -------------------------------- ------------------------------ ------------------- ----------------
</TABLE>

- --------------------------
(1)  We granted a total of 225,000 options to employees in the fiscal year ended
     December 31, 2001.

Option Grants in 2002

<TABLE>
<CAPTION>
        ----------------------- -------------------------------- ------------------------------ ------------------- ----------------
                                  Number of Securities            Percent of Options Granted
                                 Underlying Options Granted(#)   to Employees in Fiscal Year(1)   Exercise Price    Expiration Date
                                 -----------------------------    --------------------------    ------------------  ----------------
                                                                                                      ($/SH)
        <S>                       <C>                             <C>                            <C>                <C>

        Arthur August                      85,000                            27.9%                    $6.35               06/12

        Edward J. Fred                    100,000                            32.8%                    $6.35               06/12
        ----------------------- -------------------------------- ------------------------------ ------------------- ----------------
</TABLE>

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

(1)  We granted a total of 305,000 options to employees in the fiscal year ended
     December 31, 2002.



                                       26
<PAGE>

Aggregated Option Exercises and Option Values

<TABLE>
<CAPTION>
        -----------------------------------------------------------------------------------------------------------------------
                                                                                                  Value of Unexercised
                                                           Number of Unexercised                  In-The-Money Options
                        Shares Acquired    Value            Options Exercisable/                    ($)Exercisable/
              Name      on Exercise (#)   Realized             Unexercisable                         Unexercisable
              ----      ---------------   --------   -------------------------------------  --------------------------------------
                                                     December 31, 2001  September 30, 2002  December 31, 2001   September 30, 2002
                                                     -----------------  ------------------  -----------------   ------------------
        <S>              <C>              <C>        <C>                <C>                 <C>                 <C>
        Arthur August         -0-           -0-          496,585/1,750        533,334/0            $38,000/0      $1,456,450/0

        Edward J. Fred        -0-           -0-              305,002/0        401,668/0            $38,000/0      $1,063,150/0

        Timothy Stone         -0-           -0-               30,000/0              0/0                  -0-              $0/0

        -----------------------------------------------------------------------------------------------------------------------
</TABLE>


Employee Benefit Plans

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

Stock Options

     Performance Equity Plan 2000



     The Performance Equity Plan 2000 authorizes the grant of 830,000 stock
options, stock appreciation rights, restricted stock, deferred stock, stock
reload options, and other stock based awards of which options to purchase an
aggregate of 715,000 common shares have been granted, at exercise prices ranging
from $1.20 to $6.35 per share. As of February __, 2003, options to purchase
115,000 additional common shares remain available for grant.

     1998 Performance Equity Plan

     The 1998 Performance Equity Plan authorizes the grant of 463,334 stock
options, stock appreciation rights, restricted stock, deferred stock, stock
reload options, and other stock based awards of which options to purchase an
aggregate of 431,002 common shares have been granted, at exercise prices ranging
from $2.53 to $6.90 per share. As of February __, 2003, options to purchase
2,332 additional common shares remain available for grant.

     1995 Stock Option Plan

     The 1995 Employee Stock Option Plan authorizes the grant of 200,000 stock
options and stock appreciation rights of which options to purchase an aggregate
of 6,334 common shares have been granted, at exercise prices ranging from $2.53
to $6.27 per share. As of February __, 2003, options to purchase 158,810
additional common shares remain available for grant.



     1992 Employee Stock Option Plan

     The 1992 Employee Stock Option Plan authorized the grant of 83,334 options,
of which options to purchase 41,668 shares are outstanding at exercise prices
ranging from $2.59 to $6.27 per share. No more shares may be granted under this
plan.

                                      27

<PAGE>

     Other Options

     In April 1998, we issued warrants to purchase 33,334 common shares to
designees of Ladenburg Capital Management Inc. as compensation for certain
consulting services. The remaining unexercised warrants entitle the holders to
purchase 17,088 common shares at an exercise price of $4.50 through March 2003.

     On December 31, 1999 and February 1, 2002, we granted to John Aneralla, the
stepson of Arthur August, five year non-plan options to purchase 15,000 and
5,000 common shares, respectively, as compensation for consulting services. The
exercise prices of the options are $2.53 and $1.65, respectively, the fair
market value of our common shares on the date of grant of the options.

     Equity Compensation Plan Information

     The following table sets forth certain information at December 31, 2002
with respect to our equity compensation plans that provide for the issuance of
options, warrants or rights to purchase our securities.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                      Number of Securities
                                        to be Issued upon             Weighted-Average        Number of Securities Remaining
                                           Exercise of                Exercise Price of      Available for Future Issuance under
                                      Outstanding Options,          Outstanding Options,    Equity Compensation Plans (excluding
Plan Category                          Warrants and Rights           Warrants and Rights   securities reflected in the first column)
- -------------                          -------------------           -------------------   -----------------------------------------
<S>                                    <C>                           <C>                   <C>
Equity Compensation Plans Approved
by Security Holders                          1,197,338                      $3.49                                272,808



Equity Compensation Plans Not
Approved by Security Holders(1)                 37,088                      $3.32                                   -0-

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


- -------------------
(1)  See "Stock Options - Other Options" description above.

                                      28

<PAGE>
                             Principal Shareholders



     The table and accompanying footnotes set forth certain information as of
February __, 2003, with respect to the ownership of our common shares by:



     o    each person or group who beneficially owns more than 5% of our common
          shares;

     o    each of our directors,

     o    our chief executive officer and our other executive officers whose
          total compensation exceeded $100,000 during the fiscal year ended
          December 31, 2002, and

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



     A person is deemed to be the beneficial owner of securities that can be
acquired by the person within 60 days from the record date upon the exercise of
warrants or options. Accordingly, common shares issuable upon exercise of
options and warrants that are currently exercisable or exercisable within 60
days of February __, 2003 have been included in the table with respect to the
beneficial ownership of the person owning the options or warrants, but not with
respect to any other persons.

<TABLE>
<CAPTION>
                                                                                          Percent of Common Shares
Name and Address                                 Shares                                   ------------------------
Of Beneficial Owner                      Beneficially Owned(1)            Prior to the Offering(2)             After the Offering
- -------------------                      --------------------             ------------------------             ------------------
<S>                                      <C>                              <C>                                  <C>
Arthur August(3)                                 841,518(4)                        25.2%                            15.8%

Edward J. Fred(3)                                398,434(5)                        12.4%                             7.7%

Walter Paulick(3)                                 10,000(6)                          *                                *

Kenneth McSweeney(3)                              13,334(7)                          *                                *

Daniel Liguori(8)                                333,334(9)                        10.6%                              *

All directors and executive                    1,263,286(10)                       33.7%                            21.9%
officers as a group (four persons)
- ----------------------------------------
*        Less than 1%.

</TABLE>

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



(2)  There are 2,805,668 shares currently issued and outstanding. Each person
     beneficially owns a percentage of our outstanding common shares equal to a
     fraction, the numerator of which is the number of common shares held by
     such person plus the number of common shares that he can acquire within 60
     days of February _, 2003 upon the exercise or conversion of options,
     warrants or convertible securities and the denominator of which is
     2,805,668 (the number of common shares currently outstanding) plus the
     number of shares he can so acquire during such 60-day period.



(3)  The business address of Messrs. August, Fred, Paulick and McSweeney is c/o
     CPI Aerostructures, Inc., 200A Executive Drive, Edgewood, New York 11717.



(4)  Includes 533,334 common shares that Mr. August has the right to acquire
     upon exercise of options. Excludes an aggregate of 38,134 common shares and
     options owned by Mr. August's adult children, all of which shares Mr.
     August disclaims beneficial ownership. Includes 3,000 common shares owned
     by Mr. August's wife.



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

(6)  Represents common shares that Mr. Paulick has the right to acquire upon
     exercise of options.



(7)  Includes 10,000 common shares that Mr. McSweeney has the right to acquire
     upon exercise of options.



(8)  Mr. Liguori's address is 1001 Bay Road, #210C, Vero Beach, Florida 32963.

(9)  Represents 333,334 common shares that Ralok, Inc. has the right to acquire
     by converting the promissory note it received in connection with our
     purchase of Kolar Machine, Inc. Mr. Liguori is the President of Ralok. We
     intend to repurchase the note upon consummation of this offering.



(10) Includes an aggregate of 951,668 common shares that Messrs. August, Fred,
     Paulick and McSweeney have the right to acquire upon exercise of
     outstanding options.


                                       29

<PAGE>

                        Description of Our Capital Shares



     Our certificate of incorporation authorizes us to issue 50,000,000 common
shares, par value $.001 per share, and 5,000,000 preferred shares, par value
$.001 per share. Immediately prior to this offering, 2,805,668 common shares
were issued and outstanding. Immediately after this offering, there will be
2,000,000 more common shares outstanding. If the underwriter elects to exercise
its over-allotment option, there will be an additional 300,000 shares
outstanding. No preferred shares are issued and outstanding.



Common Shares

     You will be entitled to one vote per common share held by you on all
matters submitted to a vote of our shareholders. Holders of common shares have
no preemptive rights and have no rights to convert their common shares into any
other securities. In the event of our dissolution or liquidation or the
winding-up of our business, you will be entitled to share ratably with our other
common shareholders in all assets remaining after payment of all of our
liabilities, and subject to any preferential payments to the holders of any
preferred shares then outstanding. Although we are restricted from paying cash
dividends under the terms of the agreements governing our debt, holders of
common shares are entitled to receive ratably such dividends as may be declared
by our board of directors out of funds legally available therefor.

     All of our outstanding common shares are, and when issued, the common
shares offered hereby will be, fully paid and nonassessable.

Preferred Shares

     Subject to the provisions of our certificate of incorporation and to the
limitations prescribed by law, our board of directors has the authority, without
further action by our shareholders, to issue up to 5,000,000 shares of our
authorized but unissued preferred shares in or more series. Our board of
directors has the power and authority to fix the designations, preferences,
dividend, conversion, cumulative, relative, participating, optional or other
rights, including voting rights, qualifications, limitations and restrictions
any or all of which may be greater than the rights of our common shares. We have
no present plans to issue any preferred shares.

New York Law, Certificate of Incorporation and By-Law Provisions that May Have
an Anti-Takeover Effect

     The following discussion concerns certain provisions of New York law and
our certificate of incorporation and by-laws that may delay, deter or prevent a
tender offer or takeover attempt that you might consider to be in your best
interest, including offers or attempts that might result in a premium being paid
to you over the market price of our securities.

     New York law. We are subject to Section 912 of the New York Business
Corporation Law. In general, Section 912 prohibits a publicly held New York
corporation from engaging in a business combination with an interested
shareholder for a period of five years after the date of the transaction in
which the person became an interested shareholder unless, prior to such date,
the corporation's board of directors approved either the business combination or
the transaction which resulted in the shareholder becoming an interested
shareholder. A business combination includes a merger, asset sale or other
transaction resulting in a financial benefit to the shareholder. An interested
shareholder is a person who, together with affiliates and associates, owns (or
within five years did own) 20% or more of the corporation's voting shares.

     Certificate of incorporation and bylaws. Our certificate of incorporation
provides for a board of directors divided into three classes, each of which
generally serves for a term of three years, with only one class of directors
being elected each year. Nominations for our board of directors may be made by
our board or by any shareholder entitled to vote for the election of directors.
A shareholder entitled to vote for the election of directors may nominate a
person or persons for election as director only if written notice of such
shareholder's intent to make such nomination is given to our secretary not later
than 120 days in advance of the meeting. Our certificate of incorporation and
by-laws do not provide for cumulative voting rights. This means that holders of
a majority of our capital shares who vote in the election of directors can elect
all of the directors and, in such event, the holders of the remaining shares
will not be able to elect any of our directors.

     New York Law provides that, unless otherwise provided in a corporation's
certificate of incorporation, any action by the shareholders may be taken
without a meeting, without prior notice and without a vote, upon the written
consent of shareholders holding not less than the minimum number of votes that
would be necessary to take action on the matter at a shareholder meeting. Our

                                       30

<PAGE>

certificate of incorporation provides that shareholder actions by consent
require the consent of all of our shareholders. This has the effect of delaying
the ability of a majority shareholder to acquire control of our board of
directors.

     Undesignated preferred shares enable us to render more difficult or to
discourage a third party's attempt to obtain control of us by means of a tender
offer, proxy contest, merger, or otherwise, which protects the continuity of our
management. A party may also be discouraged from making a bid for our common
shares because the issuance of our preferred shares may adversely affect the
rights of the holders of our common shares. For example, preferred shares that
we issue may rank prior to our common shares as to dividend rights, liquidation
preferences, or both, may have full or limited voting rights and may be
convertible into common shares. Accordingly, the issuance by us of preferred
shares may discourage or delay bids for our common shares or may otherwise
adversely affect the market price of our common shares.

Market for Common Equity and Related Shareholder Matters

Market Information

     Our common shares are listed on the American Stock Exchange under the
symbol CVU. The trading symbol changed from CPIA to CVU on September 5, 2000,
when CPI ceased trading on The Nasdaq SmallCap Market, Inc. and began trading on
the AMEX.

     The following tables set forth for 2001 and 2002, the high and low sales
prices of our common shares for the periods indicated, as reported by AMEX.

   -----------------------------------------------------------------------------
   Period                                        High                Low
   ------                                        ----                ---
   2001
   ----
   Quarter Ended March 31, 2001                $3.930               $1.800
   Quarter Ended June 30, 2001                 $3.150               $1.650
   Quarter Ended September 30, 2001            $1.700               $1.150
   Quarter Ended December 31, 2001             $2.190               $1.200



   2002
   ----
   Quarter Ended March 31, 2002                $1.850               $1.400
   Quarter Ended June 30, 2002                 $8.460               $1.450
   Quarter Ended September 30, 2002            $7.750               $4.080
   Quarter Ended December 31, 2002*            $7.130               $4.400
   -----------------------------------------------------------------------------



     On February _, 2003, the closing sale price for our common shares on the
AMEX was $____.



Dividend Policy

     To date, we have not paid any dividends on our common shares. Any payment
of dividends in the future is within the discretion of our board of directors
and will depend on our earnings, if any, our capital requirements and financial
condition and other relevant factors. Our board of directors does not intend to
declare any cash or other dividends in the foreseeable future, but intends
instead to retain earnings, if any, for use in our business operations.

     In addition, our bank and other lender credit agreements provide that we
may not declare or pay any dividend on our common shares so long as any amounts
are owing to the lenders.

                                       31
<PAGE>

Transfer Agent

     The transfer agent for our common shares is American Stock Transfer & Trust
Company, 6201 15th Avenue, Brooklyn, New York 11219.

Holders



     As of February __, 2003, there were ___ holders of record of our common
shares. We believe there are in excess of 2,200 beneficial owners of our common
shares.


























                                       32
<PAGE>

                                  Underwriting



     Our underwriter has agreed, subject to the terms and conditions contained
in the underwriting agreement, to purchase from us on a firm commitment basis, a
total of 2,000,000 common shares.

     Our underwriter has qualified its obligations under the underwriting
agreement to the approval of legal matters by counsel and various other
conditions. Subject to these conditions, our underwriter is obligated to
purchase all of the common shares offered by this prospectus (other than the
common shares covered by the over-allotment option described below).

     Our underwriter has advised us that it proposes to offer our securities to
the public at the initial public offering price set forth on the cover page of
this prospectus and to certain dealers at the same price, less a concession not
in excess of $__ per share of our common shares. Our underwriter may allow, and
such dealers may reallow, a concession not in excess of $__ per common share to
certain other dealers. After the offering, our underwriter may change the
offering price and other selling terms.

     We have agreed to indemnify our underwriter against certain liabilities,
including liabilities under the Securities Act. We also have agreed to pay our
underwriter an expense allowance on a non-accountable basis equal to 3% of
the gross proceeds derived from the sale of the common shares offered by this
prospectus (including the sale of any of our common shares subject to the
underwriter's over-allotment option), $50,000 of which has been paid to date. We
have agreed to pay all expenses in connection with qualifying our securities
offered hereby for sale under the laws of such states as our underwriter may
designate and the filing fees incurred in registering the offering with the
National Association of Securities Dealers, Inc., or NASD.

     We have granted to our underwriter an option, exercisable within 45
business days from the date of this prospectus, to purchase at the offering
price, less underwriting discounts and the non-accountable expense allowance, up
to an aggregate of 300,000 additional common shares for the sole purpose of
covering over allotments, if any.

     In connection with the offering, we have agreed to sell to our
underwriter and/or its designees, for an aggregate of $100, a warrant to
purchase up to an aggregate of 200,000 common shares. The underwriter's
warrant is exercisable initially at a price of $___ per share (110% of the per
share offering price to investors) for a period of four years commencing one
year from the date of this prospectus. The warrant may not be transferred, sold,
assigned, or hypothecated during the one-year period following the date of this
prospectus except to the underwriter and the selected dealers and their
officers or partners. The underwriter's warrant grants to the holders thereof
certain demand rights for a period of five years and "piggyback" rights for a
period of seven years from the date of this prospectus with respect to the
registration under the Securities Act of the common shares issuable upon the
exercise of the warrant.

     Pursuant to the underwriting agreement, all of our officers and directors
have agreed not to sell any common shares for at least 13 months from the date
of this prospectus without the consent of EarlyBirdCapital; except that the
underwriter has agreed that Mr. Arthur August may adopt a plan under Rule 10b5-1
of the Securities Exchange Act of 1934, pursuant to which he can sell up to
10,000 of his common shares per month commencing three months after the date of
this prospectus. In addition, the underwriting agreement provides that, for a
period of five years from the date of this prospectus, EarlyBirdCapital will
have the right to designate one person to serve on our board of directors or to
send a representative (who need not be the same individual from meeting to
meeting) to observe each meeting of our board of directors. Such designee or
representative, as the case may be, shall receive the same compensation as the
other non-management directors (excluding the chairman of the audit committee)
and shall be entitled to receive reimbursement for all reasonable costs incurred
in attending such meetings, including, but not limited to, food, lodging and
transportation.



     Upon consummation of this offering, we will enter into a five-year Merger
and Acquisition Agreement with EarlyBirdCapital pursuant to which we will
compensate them if we enter into any transaction (including an acquisition or
merger, joint venture, strategic alliance or other arrangements) with persons
introduced to us by EarlyBirdCapital.


                                       33
<PAGE>



     In connection with the offering, the underwriter may engage in stabilizing
transactions, over-allotment transactions, syndicate coverage transactions and
penalty bids in accordance with Regulation M under the Exchange Act:



     o    Stabilizing transactions permit bids to purchase the underlying
          security so long as the stabilizing bids do not exceed a specified
          maximum.



     o    Over-allotment involves sales by our underwriter of our securities in
          excess of the number of securities our underwriter is obligated to
          purchase, which creates a syndicate short position. The short position
          may be either a covered short position or a naked short position. In a
          covered short position, the number of our securities over-allotted by
          our underwriter is not greater than the number of our securities that
          it may purchase in the over-allotment option. In a naked short
          position, the number of our securities involved is greater than the
          number of securities in the over-allotment option. Our underwriter
          may close out any covered short position by either exercising its
          over-allotment option and/or purchasing our securities in the open
          market.

     o    Syndicate covering transactions involve purchases of our securities in
          the open market after the distribution has been completed in order to
          cover syndicate short positions. In determining the source of
          securities to close out the short position, our underwriter will
          consider, among other things, the price of securities available for
          purchase in the open market as compared to the price at which it may
          purchase securities through the over-allotment option. If our
          underwriter sells more securities than could be covered by the
          over-allotment option, a naked short position, the position can be
          closed out only by buying our securities in the open market. A naked
          short position is more likely to be created if our underwriter is
          concerned that there could be downward pressure on the price of our
          securities in the open market after pricing that could adversely
          affect investors who purchase in the offering.

     o    Penalty bids permit our underwriter to reclaim a selling concession
          from a selling group member when the securities originally sold by the
          selling group member are purchased in a stabilizing or syndicate
          covering transaction to cover syndicate short positions.



These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of our securities
or preventing or retarding a decline in the market price of our securities. As a
result, the price of our securities may be higher than the price that might
otherwise exist in the open market. These transactions may be effected on The
American Stock Exchange or otherwise and, if commenced, may be discontinued at
any time.

                                  Legal Matters



     The validity of the issuance of the common shares offered hereby have been
passed upon for CPI Aerostructures, Inc. by Graubard Miller. Davis & Gilbert LLP
has served as counsel to the underwriter in connection with this offering.



                                     Experts

     The financial statements for the years ended December 31, 2000 and 2001
appearing in this prospectus and registration statement have been audited by
Goldstein Golub Kessler LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein.

                      Disclosure of Commission Position on
                 Indemnification for Securities Act Liabilities

     Our by-laws and certificate of incorporation include provisions permitted
under New York law by which our officers and directors are to be indemnified
against various liabilities. We have also entered into indemnification
agreements with our executive officers. We believe that these provisions and
agreements will facilitate our ability to continue to attract and retain
qualified individuals to serve as our directors and officers.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons, we
have been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

                                       34

<PAGE>

                    Where You Can Find Additional Information

     We intend to furnish our shareholders with annual reports, which will
include financial statements audited by our independent accountants, and other
periodic reports as we may determine to furnish or as may be required by law,
including Sections 13(a) and 15(d) of the Exchange Act.

     As permitted by the rules and regulations of the Commission, this
prospectus does not contain all of the information set forth in the Registration
Statement and in the exhibits and schedules thereto. For further information
with respect to CPI Aerostructures, Inc. and the common shares offered hereby,
reference is made to the Registration Statement and the exhibits thereto.  The
Registration Statement, including the exhibits and schedules thereto, may be
obtained at the address noted below.

     We file annual and other periodic reports pursuant to the requirements of
the Securities Exchange Act of 1934, as amended. Such reports and other
information filed by us may be inspected and copied at the public reference
facilities of the Commission in Washington, D.C., and can be read or obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The Commission maintains a website that contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission at HTTP://WWW.SEC.GOV.
















                                       35
<PAGE>


                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------









Independent Auditor's Report                                                 F-2


Consolidated Financial Statements:

   Balance Sheet as of September 30, 2002 (unaudited)
        and December 31, 2001                                                F-3

   Statement of Operations for the Nine Months Ended
        September 30, 2002 and 2001 (unaudited) and
        for the Years Ended December 31, 2001 and 2000                       F-4

   Statement of Shareholders' Equity/Deficiency for the period
        from January 1, 2000 through September 30, 2002                      F-5

   Statement of Cash Flows for the Nine Months Ended
        September 30, 2002 and 2001 (unaudited) and
        for the Years Ended December 31, 2001 and 2000                       F-6


   Notes to Consolidated Financial Statements                         F-7 - F-18


                                      F-1




<PAGE>



INDEPENDENT AUDITOR'S REPORT




To the Board of Directors
CPI Aerostructures, Inc.


We have audited the accompanying consolidated balance sheet of CPI
Aerostructures, Inc. and Subsidiary as of December 31, 2001 and the related
consolidated statements of operations, shareholders' deficiency, and cash flows
for each of the two years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CPI Aerostructures,
Inc. and Subsidiary as of December 31, 2001, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America.


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



March 29, 2002, except for the last paragraph of
 Note 5, as to which the date is April 12, 2002
 and Note 6(a) and the first paragraph of Note 13,
 as to which the date is June 22, 2002



                                                                             F-2


<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                                      CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------

                                              September 30,         December 31,
                                                       2002                 2001
- --------------------------------------------------------------------------------
                                               (Unaudited)

ASSETS

Current Assets:
  Cash                                        $     121,002      $      180,578
  Accounts receivable                             2,852,597           2,168,369
  Costs and estimated earnings in excess of
   billings on uncompleted contracts             10,214,846           6,967,385
  Deferred income taxes                             253,000             758,000
  Prepaid expenses and other current assets          23,745              84,895
  Assets held for sale - discontinued
   operations                                       280,676           3,217,984
- -------------------------------------------------------------------------------

      Total current assets                       13,745,866          13,377,211

Property, Plant and Equipment, net                  110,340             101,260

Deferred Income Taxes, net of valuation
 allowance of $2,074,000                               -                172,000

Other Assets                                        179,226             180,226

- -------------------------------------------------------------------------------
      Total Assets                            $  14,035,432      $   13,830,697
===============================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
  Accounts payable                            $   4,985,799      $    4,195,530
  Accrued expenses                                  152,692             535,054
  Line of credit                                       -              1,700,000
  Debt                                            8,341,071           9,607,284
  Deferred income taxes                                -                147,000
- -------------------------------------------------------------------------------
      Total current liabilities                  13,479,562          16,184,868
- -------------------------------------------------------------------------------


Commitments and Contingencies



Shareholders' Equity (Deficiency):
  Preferred shares - $.001 par value;
  authorized 3,000,000 shares, issued
  and outstanding 0 and 0, respectively;
  Common shares - $.001 par value;
  authorized 50,000,000 shares, issued
  and outstanding 2,755,670 and 2,657,046
  shares, respectively                                2,756               2,657
  Additional paid-in capital                     12,495,872          12,367,020
  Accumulated deficit                           (11,942,758)        (14,723,848)

- -------------------------------------------------------------------------------
      Shareholders' equity (deficiency)             555,870          (2,354,171)
- -------------------------------------------------------------------------------
      Total Liabilities and Shareholders'
      Equity (Deficiency)                     $  14,035,432      $   13,830,697
===============================================================================

                                  See Notes to Consolidated Financial Statements


                                                                             F-3

<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                            CONSOLIDATED STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                               For the Nine Months                   For the Year
                                                               Ended September 30,                Ended December 31,
                                                             2002              2001             2001              2000
- ----------------------------------------------------------------------------------------------------------------------
                                                                 (Unaudited)
<S>                                                   <C>               <C>             <C>                 <C>
Revenue                                               $17,988,748       $10,631,958     $ 15,024,027        $8,261,351

Cost of sales                                          12,549,892         7,015,993       10,955,264         5,676,229
- ----------------------------------------------------------------------------------------------------------------------

Gross profit                                            5,438,856         3,615,965        4,068,763         2,585,122

Selling, general and administrative expenses            1,800,643         1,145,607        1,479,421         1,421,758

- ----------------------------------------------------------------------------------------------------------------------
Income from operations                                  3,638,213         2,470,358        2,589,342         1,163,364
- ----------------------------------------------------------------------------------------------------------------------

Other (income) expense:
  Interest income                                          (3,642)            9,223           (2,431)             -
  Interest expense                                        331,765           126,707          155,825           106,157
  Other (income) expense, net                                -                 -               4,051           233,428
- ----------------------------------------------------------------------------------------------------------------------
Total other expenses, net                                 328,123           135,930          157,445           339,585
- ----------------------------------------------------------------------------------------------------------------------

Income from continuing operations before benefit
 for income taxes                                       3,310,090         2,334,428        2,431,897           823,779

(Provision for) benefit from income taxes                (529,000)          934,000        -                  (126,000)
- ----------------------------------------------------------------------------------------------------------------------

Income before operations of discontinued segment        2,781,090         1,400,428        2,431,897           949,779

Income (loss) from operations of discontinued segment        -           (1,571,481)      (3,647,200)          979,427

Loss on disposal of assets - discontinued segment            -                 -         (10,422,816)             -

- ----------------------------------------------------------------------------------------------------------------------
Net income (loss)                                     $ 2,781,090       $  (171,053)    $(11,638,119)       $1,929,206
======================================================================================================================

Basic net income (loss) per common share:
  Income before discontinued operations               $      1.03       $       .53     $        .92        $      .36
  Income (loss) from operations of
    discontinued segment                                     -                 (.59)           (1.37)              .37
  Loss on disposal of assets - discontinued segment          -                 -               (3.94)             -

- ----------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share - basic              $      1.03       $      (.06)   $       (4.39)       $      .73
======================================================================================================================

Diluted net income per common share:
  Income before discontinued operations               $       .89              -                 -          $      .34
  Income from operations of discontinued segment                                                                   .36

- ----------------------------------------------------------------------------------------------------------------------
Earnings per common share - diluted                   $       .89              -                 -          $      .70
======================================================================================================================

Shares used in computing earnings per common share:
  Basic                                                 2,704,082         2,652,355        2,653,538         2,648,509
  Diluted                                               3,139,923         2,652,355              -           2,763,888
======================================================================================================================
</TABLE>


                                  See Notes to Consolidated Financial Statements



                                                                             F-4


<PAGE>
                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                       CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY/DEFICIENCY
- --------------------------------------------------------------------------------
Years ended December 31, 2000 and 2001


<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------

                                                                        Additional                           Total
                                           Common                         Paid-in        Accumulated     Shareholders'
                                           Shares          Amount         Capital          Deficit        Deficiency
- ----------------------------------------------------------------------------------------------------------------------
<S>                                       <C>              <C>         <C>            <C>               <C>
Balance at January 1, 2000                2,648,509        $2,649      $12,206,024    $  (5,014,935)    $   7,193,738

Net income                                   -                -            -              1,929,206         1,929,206

Amortization of fair value of
 warrants issued in conjunction
 with consulting agreement                   -                -            113,650          -                 113,650

- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000              2,648,509         2,649       12,319,674       (3,085,729)        9,236,594

Net loss                                     -                -            -            (11,638,119)      (11,638,119)

Amortization of fair value of
 warrants issued in conjunction
 with consulting agreement                    8,537             8           47,346          -                  47,354

- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2001              2,657,046         2,657       12,367,020      (14,723,848)       (2,354,171)
(unaudited)
Net income                                                                                2,781,090         2,781,090

Common stock issued for bank debt            70,000            70           38,997          -                  39,067

Common stock issued for exercise
  of stock options and warrants              28,624            29           84,073          -                  84,102

Warrants issued for consulting
  services                                   -                -              5,782          -                   5,782
- ----------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2002             2,755,670        $2,756      $12,495,872     $(11,942,758)    $     555,870
======================================================================================================================
</TABLE>















                                  See Notes to Consolidated Financial Statements



                                                                             F-5


<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                            CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------------------------------------------------
                                                                 For the Nine Months                 For the Year
                                                                  Ended September 30,             Ended December 31,
                                                                  2002           2001             2001            2000
- --------------------------------------------------------------------------------------------------------------------------
                                                                      (Unaudited)                       (Audited)
<S>                                                             <C>             <C>             <C>        <C>
Cash flows from operating activities:
  Net income before operations of discontinued segment         $ 2,781,090    $ 1,400,428       $ 2,431,897   $    949,779
  Adjustments to reconcile net income before operations of
   discontinued segment to net cash provided by (used in)
   operating activities:
    Depreciation and amortization                                   30,931         26,362            35,653         30,194
    Warrants issued for consulting fees                              5,782         47,346            47,354        113,650
    Stock issued for bank debt                                      39,067           -                 -              -
    Loss on disposal of fixed assets                                  -             6,158             6,157           -
    Deferred portion of provision (benefit) for income taxes       530,000           -               92,000       (879,000)
    Bad debts                                                                        -                 -           301,377
    Changes in operating assets and liabilities:
      Increase in accounts receivable                             (684,228)      (326,206)       (1,336,061)      (410,591)
      Decrease in income tax refund receivable                        -              -                 -            29,597
      Increase in costs and estimated earnings in excess
       of billings on uncompleted contracts                     (3,247,461)    (2,260,561)       (2,563,606)      (465,250)
      (Increase) decrease in prepaid expenses and other
       current assets                                               61,150          9,969           (63,816)       761,672
      (Increase) decrease in other assets                            1,000         (1,000)           (1,000)       (70,259)
      Increase in accounts payable and accrued expenses            407,907        180,090         1,028,720        144,878
      Decrease in income taxes payable                                -           (34,000)          (33,000)       (13,383)
- --------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) operating activities       (74,762)      (951,414)         (355,702)       492,664
- --------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Purchase of property, plant and equipment                        (40,011)       (14,507)          (19,307)       (70,838)
  Proceeds from sale of fixed assets                                  -             1,800             1,800           -
- --------------------------------------------------------------------------------------------------------------------------
         Net cash used in investing activities                     (40,011)       (12,707)          (17,507)       (70,838)
- --------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from line of credit                                        -              -                 -         1,325,000
  Net repayment of long-term debt                               (2,966,213)    (1,274,018)         (895,958)    (1,056,959)
  Proceeds from exercise of stock options                           84,102           -                 -              -
- --------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) financing activities    (2,882,111)    (1,274,018)         (895,958)       268,041
- --------------------------------------------------------------------------------------------------------------------------

Net cash from continuing operations                             (2,996,884)    (2,238,139)       (1,269,167)       689,867

Net cash provided by (used in) discontinued operations           2,937,308      2,386,569         1,386,766       (814,534)
- --------------------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash                                    (59,576)       148,430           117,599       (124,667)

Cash at beginning of period                                        180,578         62,979            62,979        187,646
- --------------------------------------------------------------------------------------------------------------------------
Cash at end of period                                          $   121,002    $   211,409       $   180,578   $     62,979
==========================================================================================================================

Supplemental disclosures of cash flow information:
 Cash paid during the period for:
  Interest                                                     $      -       $   167,015       $   589,762   $       -
==========================================================================================================================
    Income taxes                                               $    13,355    $    36,050       $      -      $       -
==========================================================================================================================

Supplemental schedule of noncash financing activity:
  Financing obligation incurred in connection with the
   acquisition of equipment                                    $      -       $   143,908       $      -      $       -
==========================================================================================================================
</TABLE>

                                  See Notes to Consolidated Financial Statements



                                                                             F-6


<PAGE>


                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


1. PRINCIPAL        The Company consists of CPI Aerostructures, Inc.("CPI") and
   BUSINESS         its wholly owned subsidiary, Kolar, Inc. ("Kolar"),
   ACTIVITY AND     collectively, the "Company."
   SUMMARY OF
   SIGNIFICANT      CPI's operations consist of the design and production of
   ACCOUNTING       design and production of complex aerospace structural
   POLICIES:        subassemblies under U.S. government and commercial
                    contracts. The length of the Company's contracts varies but
                    is typically between one and two years for U.S. government
                    contracts and up to 10 years for commercial contracts.

                    Kolar's principal business was the precision computer
                    numerical control machining of metal products on a
                    contract-order basis.

                    CPI's revenue is recognized based on the percentage of
                    completion method of accounting for long-term contracts
                    measured by the percentage of total costs incurred to date
                    to estimated total costs at completion for each contract.
                    Contract costs include all direct material, labor costs,
                    tooling and those indirect costs related to contract
                    performance, such as indirect labor, supplies, tools,
                    repairs and depreciation costs. Selling, general and
                    administrative costs are charged to expense as incurred.
                    Estimated losses on uncompleted contracts are recognized in
                    the period in which such losses are determined. Changes in
                    job performance may result in revisions to costs and income
                    and are recognized in the period in which revisions are
                    determined to be required. In accordance with industry
                    practice, costs and estimated earnings in excess of billings
                    on uncompleted contracts, included in the accompanying
                    consolidated balance sheet, contain amounts relating to
                    contracts and programs with long production cycles, a
                    portion of which will not be realized within one year. CPI's
                    recorded revenue may be adjusted in later periods in the
                    event that CPI's cost estimates prove to be inaccurate or a
                    contract is terminated.

                    Kolar's revenue was recognized when goods were shipped to
                    customers.

                    The Company maintains cash in bank deposit accounts which,
                    at times, may exceed federally insured limits. The Company
                    has not experienced any losses in such accounts. The Company
                    believes it is not exposed to any significant credit risk on
                    cash.

                    Depreciation and amortization of property, plant and
                    equipment is provided for by the straight-line method over
                    the estimated useful lives of the respective assets or the
                    life of the lease, for leasehold improvements.

                    The preparation of financial statements in conformity with
                    accounting principles generally accepted in the United
                    States of America requires the use of estimates by
                    management. Actual results could differ from these
                    estimates.

                    In accordance with the provisions of Statement of Financial
                    Accounting Standards ("SFAS") No. 123, Accounting for
                    Stock-Based Compensation, the Company has elected to apply
                    APB Opinion ("APB") No. 25 and related interpretations in
                    accounting for its stock options issued to employees and,
                    accordingly, does not recognize additional compensation cost
                    as required by SFAS No. 123. The Company, however, has
                    provided the pro forma disclosures as if the Company had
                    adopted the cost recognition requirements.

                                                                             F-7

<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    Basic earnings per common share is computed using the
                    weighted-average number of shares outstanding. Diluted
                    earnings per common share is computed using the
                    weighted-average number of shares outstanding adjusted for
                    the incremental shares attributed to outstanding options and
                    warrants to purchase common stock. Incremental shares of
                    115,379 were used in the calculation of diluted earnings per
                    common share in 2000. In 2001, diluted earnings per share is
                    not presented as the result is antidilutive.

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

                    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 supersedes
                    APB No. 16, Business Combinations, as well as 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 supersedes APB
                    No. 17, Intangible Assets.

                    The Company believes that SFAS No. 142 will not be
                    applicable to its future financial statements because all
                    goodwill has been entirely written down in conjunction with
                    the sale of Kolar's assets (see Note 5).

                    In August 2001, the FASB issued SFAS No. 144, Accounting for
                    the Impairment or Disposal of Long-Lived Assets. This
                    statement addresses financial accounting and reporting for
                    the impairment or disposal of long-lived assets. This
                    statement supersedes SFAS No. 121, Accounting for the
                    Impairment of Long-Lived Assets and for Long-Lived Assets to
                    Be Disposed Of, and amends the accounting and reporting
                    provisions of APB No. 30, Reporting the Results of
                    Operations, Reporting the Effect of Disposal of a Segment of
                    a Business, and Extraordinary, Unusual and Infrequently
                    Occurring Events and Transactions, for the disposal of a
                    segment of a business. The provisions of SFAS No. 144 will
                    be effective for fiscal years beginning after December 15,
                    2001.

                    Pursuant to the effective dates and transitions stated in
                    SFAS No. 144, the Company is currently evaluating the
                    implications of its adoption, and anticipates adopting the
                    provisions for its fiscal year beginning January 1, 2002.


                                                                             F-8

<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    The financial statements as of September 30, 2002 and for
                    the nine months ended September 30, 2002 and 2001 are
                    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.



2. COSTS AND        Costs and estimated earnings in excess of billings on
   ESTIMATED        uncompleted contracts consist of:
   EARNINGS IN
   EXCESS OF
   BILLINGS ON
   UNCOMPLETED
   CONTRACTS

<TABLE>
<CAPTION>
                                                    September 30, 2002                    December 31, 2001
                    ----------------------------------------------------------------------------------------------------------------
                                                         (unaudited)
                                            U.S.                                          U.S.
                                         Government     Commercial        Total        Government      Commercial       Total
                    ----------------------------------------------------------------------------------------------------------------
                    <S>                 <C>             <C>               <C>          <C>             <C>              <C>
                    Costs incurred on
                     uncompleted
                     contracts         $18,413,197     $13,017,710     $31,430,907     $7,359,234      $12,485,185     $19,844,419
                    Estimated earnings   7,810,645       5,947,898      13,758,543      2,040,413        6,728,158       8,768,571
                    ----------------------------------------------------------------------------------------------------------------

                                        26,223,842      18,965,608      45,189,450      9,399,647       19,213,343      28,612,990

                    Less billings to
                     date               18,063,324      16,911,280      34,974,604      5,425,681       16,219,924      21,645,605
                    ----------------------------------------------------------------------------------------------------------------

                      Costs and
                       estimated
                       earnings in
                       excess of
                       billings on
                       uncompleted
                       contracts       $ 8,160,518     $ 2,054,328     $10,214,846     $3,973,966      $ 2,993,419     $ 6,967,385
                    ================================================================================================================
</TABLE>


                    Unbilled costs and estimated earnings are billed in
                    accordance with applicable contract terms. As of December
                    31, 2001 and September 30, 2002, approximately $1,203,000
                    and $1,137,000 (unaudited) of the balances above are not
                    expected to be collected within one year, respectively.
                    Amounts not paid or billed under retainage provisions are
                    not material.



3. PROPERTY         Property, plant and equipment, at cost, consists of the
   PLANT AND        following:
   EQUIPMENT:                                                          Estimated
                    December 31, 2001                                Useful Life
                    ------------------------------------------------------------

                    Machinery and equipment         $304,306       5 to 10 years
                    Computer equipment               134,019             9 years
                    Furniture and fixtures            19,504             7 years
                    Automobiles and trucks            23,488             5 years
                    Leasehold improvements            71,591             3 years
                    ------------------------------------------------------------

                                                     552,908
                    Less accumulated depreciation
                     and amortization                451,648
                    ------------------------------------------------------------
                                                    $101,260
                    ============================================================


                                                                          F-9

<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    Depreciation and amortization expense for the years ended
                    December 31, 2001 and 2000 was $35,653 and $30,194,
                    respectively.

 4. RELATED PARTY   In October 2000, the Company adopted a Greit Plan for the
    TRANSACTIONS:   purpose of offering senior management a deferred
                    compensation death benefit plan (the "Plan") that provides a
                    tax-free benefit and which is tax-neutral to the Company.
                    Pursuant to the Plan, the Company made a noninterest-bearing
                    loan to an employee in the amount of $150,000, which was
                    used to purchase the Plan. This Plan has since been
                    terminated and the surrender value has been returned to the
                    employee who has placed the proceeds from the surrender
                    value in an annuity, which will mature to $150,000.
                    The employee also assigned to the Company an insurance
                    policy on his life in the amount of $150,000 and agreed to
                    maintain it until the date upon which the annuity matures to
                    $150,000, and is included in other assets at December 31,
                    2001. Accordingly, the loan to the employee will be repaid
                    upon the maturity date of the annuity or upon the death of
                    the employee, whichever occurs first.

5. DISCONTINUED     On January 22, 2002, the Company announced a decision made
   OPERATIONS:      by the board of directors as of December 31, 2001 to close
                    the Kolar facilities located in Ithaca, New York, and
                    liquidate Kolar's assets through a public auction of its
                    machinery and equipment and a private sale of its real
                    estate. On February 21, 2002, Kolar sold a substantial
                    portion of its machinery and equipment at an auction
                    conducted by Daley-Hodkin Corporation at Kolar's main
                    facility in Ithaca, New York. In connection with the
                    discontinuance of Kolar's operations, the Company incurred a
                    one-time charge of $10,422,816 related to the write-off of
                    Kolar's assets, net of expected proceeds, and an accrual for
                    estimated losses during the phase-out period. Proceeds from
                    actual and future sales of machinery, equipment and real
                    property are estimated to be approximately $3,970,000. The
                    disposition of Kolar's operations represents a disposal of a
                    business segment under APB No. 30. Accordingly, results of
                    the operation have been classified as discontinued, and
                    prior periods have been restated. For business segment
                    reporting purposes, Kolar's business results were previously
                    classified as the "Machining" segment.

                    Net sales and income (loss) from the discontinued operations
                    are as follows:

                    For the nine months ended
                    September 30,                             2002          2001
                    ------------------------------------------------------------

                    Net sales                            $    ---     $6,840,056
                    ============================================================

                    Pretax loss from discontinued
                     operations                          $    ---     $2,505,481
                    Income tax benefit                        ---        934,000
                    ------------------------------------------------------------
                    Net loss from discontinued
                     operations                          $    ---     $1,571,481
                    ============================================================


                                                                            F-10



<PAGE>

                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    For the three months ended
                    September 30,                             2002          2001
                    ------------------------------------------------------------

                    Net sales                            $    ---     $2,624,512
                    ============================================================

                    Pretax loss from discontinued
                     operations                          $    ---     $  779,997
                    Income tax benefit                        ---        534,000

                    ------------------------------------------------------------
                    Net loss from discontinued
                     operations                          $    ---     $  245,997
                    ============================================================

                    Assets of the discontinued operations are as follows:

                    September 30, 2002
                    ------------------------------------------------------------

                    Property, plant and equipment, net                $  280,676
                    ============================================================

                    Year ended December 31,                   2001          2000
                    ------------------------------------------------------------

                    Net sales                            $8,291,690  $20,360,330
                    ============================================================


                    Pretax income (loss) from
                     discontinued operations             $(3,647,200) $  729,427
                    Pretax loss on disposal of
                     business segment                    (10,422,816)       -
                    Income tax benefit                        -          250,000
                    ------------------------------------------------------------
                    Net income (loss) from
                     discontinued operations            $(14,070,016)  $ 979,427
                    ============================================================

                    Assets of the discontinued operations were as follows:

                    Year ended December 31, 2001
                    ------------------------------------------------------------

                    Current assets                                  $    610,492
                    Property, plant and equipment, net                 2,607,492
                    ------------------------------------------------------------
                    Total assets of discontinued operations         $  3,217,984
                    ============================================================


                    Proceeds from the auction sale were approximately $1,350,000
                    for the machinery and equipment owned by Kolar. These
                    proceeds have been applied to the reduction of certain bank
                    debt having a principal amount of $2,260,000 outstanding
                    immediately prior to the auction. After giving effect to the
                    applications of the proceeds to the bank debt, the remaining
                    outstanding principal of the bank debt is $910,000.


                                                                            F-11

<PAGE>
                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


6. DEBT:            Debt consists of the following:

                                              September 30,         December 31,
                                                       2002                 2001
                                                (unaudited)
                    ------------------------------------------------------------

                    Note payable - bank (a)      $2,431,571           $2,438,500
                    Note payable - bank (b)         259,077              805,320
                    Note payable - seller (c)       624,484
                    Note payable - seller (d)     4,898,035            4,691,202
                    Capitalized lease
                      obligations payable (e)       127,904            1,672,262

                    ------------------------------------------------------------
                                                 $8,341,071           $9,607,284
                    ============================================================



                    (a)  The note, as amended in June 2002, is payable to a
                         commercial bank in monthly installments from $50,000 to
                         $100,000 through May 30, 2003, and the remaining unpaid
                         balance at June 30, 2003, plus monthly interest at the
                         bank's published prime rate (4.75% at September 30,
                         2002) plus 3.5%. This note is collateralized by
                         substantially all of the assets of the Company.
                         Approximately $1,249,000 of this loan was repaid upon
                         the sale of certain assets at auction. The note
                         requires the Company to maintain specified levels of
                         working capital and other financial ratios, as defined.
                         The line of credit of $1,700,000 previously listed
                         separately on the balance sheet is now incorporated
                         into this note.  In April 2002, the Company agreed to
                         issue 70,000 common shares valued at $110,950, the fair
                         market value on the date of issue, to the bank in
                         consideration for the bank amending and extending this
                         note. The value of the shares will be charged to
                         interest expense over the remaining period of the note.



                    (b)  The note is payable to a commercial bank in monthly
                         installments of $9,847, including interest at 8.3%.
                         This note is collateralized by Kolar's land and
                         buildings. The Company sold certain of the underlying
                         land and buildings during 2002 at an aggregate selling
                         price of approximately $555,000. The Company estimates
                         that the sale of the remaining land and buildings will
                         yield proceeds sufficient to repay the note in full.

                    (c)  The note is payable to a commercial bank in monthly
                         installments of $20,000 through May 30, 2003, and the
                         remaining unpaid balance at June 30, 2003, plus monthly
                         interest at the bank's published prime rate (4.75% at
                         September 30, 2002) plus 3.5%. This note is
                         collateralized by substantially all of the assets of
                         the Company and was previously included in the
                         capitalized lease obligations payable of the Company.



                    (d)  In 1997, the Company acquired substantially all of the
                         assets of Kolar Machine Inc. The acquisition was
                         partially financed through a $4,000,000 note payable to
                         the seller ("Seller") of Kolar Machine Inc. The note
                         payable to the Seller bears interest at 8% per annum.
                         The note matures on September 30, 2003. Until then, it
                         will continue to accrue interest, which will be paid at
                         maturity together with the principal amount, pursuant
                         to the terms of the subordination agreement between the
                         bank lenders and the Seller. The Seller is presently
                         prohibited from receiving current payments of interest
                         on its note. The note payable - seller is convertible
                         into 333,334 shares of the Company's common stock at
                         any time prior to the maturity of the note. The note is
                         subordinated to the notes payable - bank.



                    (e)  The Company leases equipment under a capital lease
                         which expires October 24, 2003. The lease requires a
                         monthly payment of $10,227.02, including interest at
                         9.35%. As of September 30, 2002, proceeds of
                         approximately $674,000 were received upon the sale of
                         certain leased equipment, which amount was remitted to
                         the owners of the equipment.


                                                                            F-12

<PAGE>
                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

7. LINE OF CREDIT:  The Company has an aggregate $1,700,000 line of credit
                    agreement, expiring June 30, 2002, with JP Morgan Chase and
                    Mellon Bank for working capital and other corporate purposes
                    as needed. Borrowings are subject to limits based on amounts
                    of accounts receivable, as defined. Interest is at the
                    banks' prime rate (4.75% at December 31, 2001) plus 3.5%.
                    The line of credit is collateralized by substantially all of
                    the assets of the Company.


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

                    Year ending December 31,

                         2002                                        $  765,200
                         2003                                           495,100
                         2004                                           468,280

                    ------------------------------------------------------------
                                                                     $1,728,580
                    ============================================================

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

9. INCOME TAXES:    The benefit for income taxes consists of the following:

                    Year ended December 31, 2000
                    ------------------------------------------------------------

                    Current:
                     Federal                                          $   4,000
                     State and local                                     10,000
                    ------------------------------------------------------------
                                                                         14,000
                    ------------------------------------------------------------

                     Deferred:
                      Federal                                          (101,000)
                      State and local                                   (39,000)
                     -----------------------------------------------------------
                                                                       (140,000)
                     -----------------------------------------------------------
                                                                      $(126,000)
                     ===========================================================

                                                                            F-13



<PAGE>
                                        CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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

                    December 31,                          2001              2000
                    ------------------------------------------------------------

                    Taxes (benefit) computed at
                     the federal statutory rate       $(3,957,000)    $ 280,000
                    State income taxes, including
                     deferred, net of federal
                     benefit                               -              7,000
                    Other, including officers' life
                     insurance and various permanent
                     differences                           -             59,000
                    Utilization of net operating
                     loss carryforward                     -           (472,000)
                    Valuation allowance                 3,957,000          -
                    ------------------------------------------------------------
                                                      $  - 0 -        $(126,000)
                    ============================================================


                    The components of deferred income tax assets and liability
                    at December 31, 2001 are as follows:

                                                       Current        Noncurrent
                    ------------------------------------------------------------

                    Assets:
                     Federal and state net
                      operating loss carryforwards    $ 758,000     $ 2,246,000
                     Valuation allowance                  -          (2,074,000)
                    ------------------------------------------------------------
                                                      $ 758,000     $   172,000
                    ============================================================

                    Liability - long-term contracts   $ 147,000     $     - 0 -
                    ============================================================


                    As of December 31, 2001, the Company had net operating loss
                    carryforwards of approximately $8,035,000 and $5,672,000 for
                    federal and state income tax purposes, respectively,
                    expiring through 2021.


10. EMPLOYEE STOCK  In April 1992, the Company adopted the 1992 Stock Option
    OPTION PLANS:   Plan (the "1992 Plan"). The 1992 Plan, for which 83,334
                    common shares are reserved for issuance, provides for the
                    issuance of either incentive stock options or nonqualified
                    stock options to employees, consultants or others who
                    provide services to the Company. The initial options granted
                    to employees and directors with three or more years of
                    service became exercisable as to one-third of the shares
                    each year beginning on September 16, 1992. The initial
                    options granted to those with less than three years of
                    service became exercisable as to one-third of the shares
                    each year beginning on September 16, 1993. The options may
                    not be exercised more than five years from the date of
                    issuance. In 1995, the option price for all outstanding

                                                                            F-14

<PAGE>
                                        CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    employees' and directors' stock options was lowered to
                    $9.00.

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

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

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

                    The Company has 6,779 options available for future grant
                    under the 1992 Plan, 40,640 options available for grant
                    under the 1995 Plan, 12,332 options available for grant
                    under the 1998 Plan, and 250,000 options available for grant
                    under the 2000 Plan.

                    If the Company had elected to recognize compensation cost
                    based on the fair value of the options granted at grant date
                    as prescribed by SFAS No. 123, net income (loss) and
                    earnings (loss) per share would have been adjusted to the
                    pro forma amounts indicated in the table below:

<TABLE>
<CAPTION>
                                                                 As Reported                        Pro Forma
                                                             2001            2000              2001           2000
                    -------------------------------------------------------------------------------------------------------
                    <S>                                     <C>              <C>               <C>           <C>
                    Net income (loss)                       $(11,638,119)    $1,929,206        $(11,937,395)  $1,832,000
                    =======================================================================================================

                    Earnings (loss) per share:
                     Basic                                  $      (4.39)    $      .73        $      (4.50)  $      .69
                     Diluted                                $      (4.39)    $      .70        $      (4.50)  $      .66
                    =======================================================================================================
</TABLE>

                                                                            F-15



<PAGE>

                                        CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    A summary of the status of the Company's four stock option
                    plans as of December 31, 2001 and 2000 and changes during
                    those years is as follows:

<TABLE>
<CAPTION>
                    Year ended December 31,                     2001                         2000
                    -----------------------------------------------------------------------------------------------
                    <S>                                 <C>             <C>           <C>        <C>

                                                                      Weighted-                   Weighted-
                                                                       average                     average
                                                                      Exercise                    Exercise
                    Fixed Options                       Options         Price         Options       Price
                    -----------------------------------------------------------------------------------------------

                    Outstanding at beginning
                     of year                            894,312        $3.54          515,313         $4.27
                    Granted during year                 225,000         1.29          408,000          2.67
                    Exercised                             -                -             -              -
                    Forfeited                            20,640         4.95           29,001          4.11
                    -----------------------------------------------------------------------------------------------
                    Outstanding at end of year        1,098,672        $3.06          894,312         $3.54
                    ===============================================================================================
</TABLE>

                    The following table summarizes information about stock
                    options outstanding and exercisable at December 31, 2001:
<TABLE>
<CAPTION>

                                                   Weighted                 Weighted-
                                                    Number                   Average              Weighted-
                                                  Outstanding               Remaining              average
                       Range of                      and                  Contractual             Exercise
                    Exercise Price                Exercisable                 Life                  Price
                    -----------------------------------------------------------------------------------------------
                    <S>                            <C>                     <C>                     <C>
                    $1.20 - $8.46                   1,098,672              4.99 years                  $3.06
                    ===============================================================================================
</TABLE>


                    The Company's assumptions used to calculate the fair values
                    of options issued were (i) risk-free interest rate of 5.25%,
                    (ii) expected life of five years, (iii) expected volatility
                    of 174.71% and (iv) expected dividends of zero.

11. WARRANTS        In February 1997, the Company issued options to purchase
    AND OPTIONS:    3,334 shares of common stock to two directors at an exercise
                    price of $6.18 per share of common stock. These options
                    expire in 2002.

                    In January 1998, the Company issued options to purchase
                    25,000 shares of common stock to a consultant, who was also
                    a director, at an exercise price of $7.50 per share of
                    common stock. In February 1998, the Company issued options
                    to purchase 3,334 shares of common stock to two directors at
                    an exercise price of $6.93 per share of common stock. These
                    options expire in 2003.

                    In March 1998, the Company issued 33,334 warrants to Gaines
                    Berland, Inc. (now known as Ladenburg Capital Management
                    Inc.) as compensation for acting as the Company's investment
                    banker pursuant to a consulting agreement. These warrants
                    entitle the investment banker to purchase 33,334 shares of
                    common stock at an exercise price of $7.50 during the
                    five-year period commencing April 1, 1998. This agreement


                                                                            F-16

<PAGE>

                                        CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

                    was terminated in 1999. In 1999, the Company recorded a
                    charge to operations of $198,734 to write off the
                    unamortized portion of warrants issued under this agreement.

                    In May 1999, the Company issued 100,000 warrants to Catalyst
                    Financial Corp. as partial compensation in the amount of
                    $227,300 for acting as the Company's investment banker
                    pursuant to a consulting agreement. These warrants entitle
                    the investment banker to purchase 100,000 shares of common
                    stock at an exercise price of $1.875 during the five-year
                    period commencing May 4, 1999. In 2001, 8,537 of these
                    warrants were exercised.

                    In December 1999, the Company issued options to purchase
                    15,000 shares of common stock to a consultant at the
                    exercise price of $2.53 per share of common stock. Also in
                    December 1999, the Company issued options to purchase 10,000
                    shares of common stock to two directors at an exercise price
                    of $2.53 per share of common stock.


                    In February 2002, the Company issued 5,000 options to a
                    consultant as compensation related to a one-year consulting
                    agreement. The options are exercisable at $1.65 per share
                    through February 2007. The options are valued at $7,845,
                    which will be expensed over the life of the agreement, based
                    on the Company's assumptions as follows: (i) risk-free
                    interest rate of 5.25%, (ii) expected life of five years,
                    (iii) expected volatility of 170.84%, and (iv) expected
                    dividends of zero.



12. EMPLOYEE        On September 11, 1996, CPI's board of directors instituted a
    BENEFIT PLANS:  defined contribution plan under Section 401(k) of the
                    Internal Revenue Code (the "Code"). On October 1, 1998, the
                    Company amended and standardized both the CPI and Kolar
                    plans as required by the Code. Pursuant to the amended plan,
                    qualified employees may contribute a percentage of their
                    pretax eligible compensation to the Plan and the Company
                    will match a percentage of each employee's contribution.
                    Additionally, the Company has a profit-sharing plan covering
                    all eligible employees. Contributions by the Company are at
                    the discretion of management. The amount of contributions
                    recorded by the Company in 2001 and 2000 amounted to $88,412
                    and $184,373, respectively.

13. CONTINGENCIES:  Kolar is currently in the process of liquidating all of its
                    assets through an auction of its fixed assets and the
                    private sale of its real estate. The proceeds of this
                    liquidation will be used to reduce Kolar's liabilities on
                    certain bank debt. The bank debt and Kolar's obligations to
                    its previous owner are secured by liens on the assets and
                    real estate to be sold and are guaranteed by the Company.
                    Various creditors have made claims against Kolar. There can
                    be no assurance that satisfactory payment terms will be made
                    with any of Kolar's creditors or with the banks regarding
                    the balance of portions of the debt, which is currently due
                    no later than June 30, 2003.

                    From time to time, the Company is subject to routine
                    litigation incidental to its business. The Company believes
                    that the settlement of any pending legal proceedings will
                    not have a material adverse effect on the Company's
                    financial condition.

                                                                            F-17

<PAGE>
                                         CPI AEROSTRUCTURES, INC. AND SUBSIDIARY

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------


14. MAJOR           Approximately 92% and 76% of the Company's consolidated net
    CUSTOMERS:      sales in 2001 and 2000 were to the U.S. government.

                    Sales to a significant commercial customer accounted for
                    approximately 24% of the Company's consolidated net sales
                    for the year ended December 31, 2000.

                    At December 31, 2001, approximately 77% of accounts
                    receivable was due from the U.S. government.














                                                                            F-18


<PAGE>

- ---------------------------------------     ------------------------------------
No dealer, salesperson or any other
person is authorized to give any
information or make any representations
in connection with this offering other
than those contained in this prospectus         CPI AEROSTRUCTURES, INC.
and, if given or made, the information or
representations must not be relied upon
as having been authorized by us. This                    [LOGO]
prospectus does not constitute an offer
to sell or a solicitation of an offer
to buy any security other than the              2,000,000 Common Shares
securities offered by this prospectus,
or an offer to sell or a solicitation
of an offer to buy any securities by
anyone in any jurisdiction in which                -----------------
the offer or solicitation is not
authorized or is unlawful. The delivery               PROSPECTUS
of this prospectus will not, under any
circumstances, create any implication              -----------------
that the information is correct as of
any time subsequent to the date of
this prospectus.

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

         TABLE OF CONTENTS

                                Page

Summary..........................3
Risk Factors.....................7
Use of Proceeds.................12
Capitalization..................13
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......14
Business........................18
Management......................24
Principal Shareholders..........29
Description of Our
Capital Shares..................30
Underwriting....................33
Legal Matters...................34              EarlyBirdCapital, Inc.
Experts.........................34
Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities......34
Where You Can Find
Additional Information..........35                February __, 2003
Index to Financial Statements..F-1

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


<PAGE>


                                     Part II

                     Information Not Required in Prospectus

ITEM 24.  Indemnification of Directors and Officers

     Sections 721 through 726, inclusive, of the Business Corporation Law of New
York ("BCL") authorizes New York corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been officers or directors and to purchase and maintain insurance for
indemnification of such officers and directors. Section 402(b) of the BCL
permits a corporation, by so providing in its certificate of incorporation, to
eliminate or limit directors' personal liability to the corporation or its
shareholders for damages arising out of certain alleged breaches of their duties
as directors. The BCL, however, provides that no such limitation of liability
may affect a director's liability with respect to any of the following: (1) acts
or omissions made in bad faith or which involved intentional misconduct or a
knowing violation of law; (2) any transaction from which the director derived a
financial profit or other advantage to which he was not legally entitled; (3)
the declaration of dividends or other distributions or purchase or redemption of
shares in violation of the BCL; or (4) the distribution of assets to
shareholders after dissolution of the corporation without paying or adequately
providing for all known liabilities of the corporation or making loans to
directors in violation of the BCL.

     The Registrant's Certificate of Incorporation, as amended, provides that
the personal liability of the directors of the Registrant is eliminated to the
fullest extent permitted by Section 402(b) of the BCL. In addition, the Amended
and Restated By-laws of the Registrant provide in substance that, each director
and officer shall be indemnified by the Registrant against reasonable expenses,
including attorney's fees, and any liabilities that he or she may incur in
connection with any action to which he or she may be made a party by reason of
his or her being or having been a director or officer of the Registrant. The
indemnification provided by the Registrant's By-laws is not deemed exclusive of
or in any way to limit any other rights which any person seeking indemnification
may be entitled. The Registrant also has directors' and officers' liability
insurance.

     In addition, the Registrant has entered into Indemnification Agreements
with each of its executive officers and directors which provide that the
Registrant will indemnify and advance expenses to such officer or director to
the fullest extent permitted by law and provides the procedure for entitlement
of indemnification.

ITEM 25.  Other Expenses of Issuance and Distribution

     The estimated expenses actually paid and payable by us in connection with
the distribution of the securities being registered are as follows:



       SEC Registration and Filing Fee....................    $    996.92
       NASD Filing Fee....................................       1,583.61
       American Stock Exchange Additional
              Listing Fee.................................      22,500.00
       Legal Fees and Expenses............................     200,000.00
       Accounting Fees and Expenses.......................      50,000.00
       Financial Printing and Engraving...................      20,000.00
       Transfer Agent and Registrar Fees..................       3,500.00
       Nonaccountable Expense Allowance...................     255,000.00
       Miscellaneous......................................     125,419.47
                                                               ----------
       TOTAL..............................................    $679,000.00


                                       i

<PAGE>



ITEM 26.  Recent Sales of Unregistered Securities

     CPI Aerostructures, Inc. made the following sales of unregistered
securities during the past three years:

<TABLE>
<CAPTION>


 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
                                                             Consideration
                                                              Received and
                                                             Description of                            If Option,
                                                            Underwriting or                            Warrant or
                                                           Other Discounts to                         Convertible
                                                              Market Price       Exemption from     Security, Terms
                                                              Afforded to         Registration       of Exercise or
 Date of Sale        Title of Security     Number Sold         Purchasers            Claimed           Conversion
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
<S>                  <C>                  <C>             <C>                     <C>              <C>

      05/18/00      Options to purchase      115,000      Options granted to          4(2)         Immediately
                    common shares                         employees - no                           exercisable until
                                                          other consideration                      12/31/04 at an
                                                          received by Company                      exercise price of
                                                          until exercise                           $2.79 per share
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      05/31/00      Options to purchase      350,000      Options granted to          4(2)         Immediately
                    common shares                         employees - no                           exercisable until
                                                          other consideration                      5/31/10 at an
                                                          received by Company                      exercise price of
                                                          until exercise                           $2.59 per share
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      04/18/01      Common Shares             25,000      Option granted to           4(2)         Fully exercisable
                                                          employee - pursuant                      upon the date of
                                                          to the Performance                       grant
                                                          Equity Plan 2000;
                                                          no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
     05/31//01      Common Shares              8,537      Common Shares               4(2)         N/A
                                                          issued to
                                                          consultant upon the
                                                          exercise of
                                                          options;  no cash
                                                          consideration
                                                          received by us as a
                                                          result of cashless
                                                          exercise provision
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
     08/14/01       Common Shares            200,000      Option granted to           4(2)         Fully exercisable
                                                          employee pursuant                        upon the date of
                                                          to the Performance                       grant
                                                          Equity Plan 2000;
                                                          no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
</TABLE>

                                       ii

<PAGE>

<TABLE>
<CAPTION>


 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
                                                             Consideration
                                                              Received and
                                                             Description of                            If Option,
                                                            Underwriting or                            Warrant or
                                                           Other Discounts to                         Convertible
                                                              Market Price       Exemption from     Security, Terms
                                                              Afforded to         Registration       of Exercise or
 Date of Sale        Title of Security     Number Sold         Purchasers            Claimed           Conversion
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
<S>                  <C>                  <C>             <C>                     <C>              <C>

  2/1/02-6/18/02    Common Shares            300,000      Options granted to          4(2)         Fully exercisable
                                                          employees and                            upon the date of
                                                          directors pursuant                       grant for five or
                                                          to the Performance                       ten years at
                                                          Equity Plan 2000                         exercise prices
                                                          and 1998 Stock                           ranging from
                                                          Option Plan;  no                         $1.65 to $6.35
                                                          cash consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      2/1/02        Common Shares             5,000       Non-Plan Option             4(2)         Fully exercisable
                                                          issued to                                upon the date of
                                                          consultant to                            grant until
                                                          purchase common                          February 1, 2007
                                                          shares;  no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      4/18/02       Common Shares             50,000      Common  Shares              4(2)                N/A
                                                          issued to bank in
                                                          consideration of
                                                          extending due date
                                                          of loan;  no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      5/21/02       Common Shares             20,833      Common Shares               4(2)                N/A
                                                          issued to employees
                                                          upon the exercise
                                                          of options;
                                                          $84,102 cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      6/03/02       Common Shares             2,653       Common  Shares              4(2)                N/A
                                                          issued to
                                                          consultants upon
                                                          the cashless
                                                          exercise of
                                                          warrants;  no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      6/24/02       Common Shares             4,137       Common  Shares              4(2)                N/A
                                                          issued to
                                                          consultants upon
                                                          the cashless
                                                          exercise of
                                                          warrants;  no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
</TABLE>

                                      iii

<PAGE>
<TABLE>
<CAPTION>


 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
                                                             Consideration
                                                              Received and
                                                             Description of                            If Option,
                                                            Underwriting or                            Warrant or
                                                           Other Discounts to                         Convertible
                                                              Market Price       Exemption from     Security, Terms
                                                              Afforded to         Registration       of Exercise or
 Date of Sale        Title of Security     Number Sold         Purchasers            Claimed           Conversion
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
<S>                  <C>                  <C>             <C>                     <C>              <C>

      8/16/02       Common Shares            20,000       Common Shares               4(2)                N/A
                                                          issued to bank in
                                                          consideration of
                                                          services; no cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
      09/09/02      Common Shares             1,000       Common  Shares              4(2)                N/A
                                                          issued to employee
                                                          upon the exercise
                                                          of  options;
                                                          $2,870 cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------
     11/11/02       Common Shares            30,000       Common  Shares              4(2)                N/A
                                                          issued to employee
                                                          upon the exercise
                                                          of  options;
                                                          $93,900 cash
                                                          consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------

      1/23/03       Common Shares            20,000       Common  Shares              4(2)                N/A
                                                          issued to bank in
                                                          consideration of
                                                          services; no
                                                          cash consideration
                                                          received by us
 ------------------ --------------------- --------------- --------------------- ------------------ -------------------

</TABLE>


ITEM 27.  Exhibits

<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>

*1.1                    Form of Underwriting Agreement                                                                     N/A

3.1                     Certificate of Incorporation of the Company, as amended.  (1)                                      3.1

3.1(a)                  Certificate of Amendment of Certificate of Incorporation filed on July 14, 1998.  (2)            3.1(a)

3.2                     Amended and Restated By-Laws of the Company.  (1)                                                  3.2



*4.7                    Form of Warrant issued to Underwriter                                                              N/A

*5.1                    Opinion of Graubard Miller                                                                         N/A



10.1                    1992 Stock Option Plan.  (1)                                                                      10.3

10.2                    1995 Employee Stock Option Plan.  (3)                                                             10.4

10.3                    Form of military contract.  (1)                                                                   10.7

10.4                    Asset Purchase  Agreement,  dated September 9, 1997 by and among Kolar Machine,  Inc., a          10.19
                        New  York  corporation,  Daniel  Liguori,  the  Company  and  Kolar,  Inc.,  a  Delaware
                        corporation and wholly-owned subsidiary of the Company.  (5)
</TABLE>

                                       iv
<PAGE>
<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>

10.5                    1998 Performance Equity Plan.  (2)                                                                10.28

10.6                    Performance Equity Plan 2000.  (4)                                                                10.29

10.7                    Stock Option Agreement,  dated August 14, 2001,  between Edward J. Fred and the Company.          10.35
                        (5)

10.8                    Stock Option  Agreement,  dated August 14, 2001,  between Arthur August and the Company.          10.36
                        (6)

10.9                    Employment  Agreement,  dated August 14, 2001,  between  Edward J. Fred and the Company.          10.37
                        (7)

10.10                   Employment Agreement, dated August 14, 2001, between Arthur August and the Company.  (7)          10.38

10.11                   Peaceful  Possession  Agreement,  by and among Kolar,  Inc., JP Morgan Chase Bank f/k/a/          10.38
                        the Chase  Manhattan Bank and JP Morgan Leasing,  Inc.,  dated January 24, 2002 (without
                        schedule). (8)

10.12                   Auction Sale Agreement,  among  Daley-Hodkin  Corporation,  Kolar, Inc., JP Morgan Chase          10.40
                        and JP Morgan Leasing, Inc., dated January 10, 2002.  (8)

10.13                   Amended and Restated Credit Agreement,  among the Borrowers,  the Lenders and JP Morgan,          10.43
                        dated June 25, 2002.  (9)

10.14                   Form of Replacement Term Note, between Kolar and JP Morgan, dated June 25, 2002.  (9)             10.44

10.15                   Tranche C Intercreditor and Subordination  Agreement,  among the Lenders,  the Borrowers          10.45
                        and JP Morgan, dated June 25, 2002.  (9)

10.16                   Tranche C Term Note, among the Borrowers and JP Morgan, dated June 25, 2002.  (9)                 10.46

10.17                   Amendment to Intercreditor and Subordination  Agreement,  among the Subordinated Lenders          10.47
                        (as therein defined), the Borrowers and JP Morgan, dated June 25, 2002.  (9)

10.18                   Amendment to Guarantee  and  Collateral  Agreement  among the  Borrowers  and JP Morgan,          10.48
                        dated June 25, 2002.  (9)

10.19                   Tranche C Mortgage,  Fixture  Filing and  Assignment of Leases and Rents,  between Kolar          10.49
                        and JPMorgan, dated June 25, 2002.  (9)

10.20                   Amendment to Security  Agreement,  between the Borrowers and Ralok, dated June 25, 2002.          10.50
                        (9)

10.21                   Amended and  Restated  Seller  Note,  between the  Borrowers  and Ralok,  dated June 25,          10.51
                        2002.  (9)

10.22                   CPI Seller Guaranty Amendment, among CPI and Ralok, dated June 25, 2002.  (9)                     10.52

10.23                   Seller  Mortgage  Subordination  Agreement,  between Ralok and JPMorgan,  dated June 25,          10.53
                        2002.  (9)

</TABLE>

                                       v
<PAGE>
<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>

10.24                   Mortgage Modification Agreement, between Kolar and JPMorgan, dated June 25, 2002.  (9)            10.54



***10.25                Agreement  among Ralok,  Inc., the Company and Green & Selfler,  as Escrow Agent,  dated          10.25
                        November 26, 2002, regarding right to purchase note.



***10.26                Form of Merger & Acquisition Agreement, between the Underwriter and the Company.                  10.26



***10.27                Registration  Rights  Agreement,  between the  Registrant  and GECapital CFE, Inc. dated          10.27
                        February 26, 2002.

***10.27.1              Schedule of Omitted Document in the form of Exhibit                                             10.27.1
                        10.27, including material detail in N/A which such
                        document differs from Exhibit 10.27.

***10.28                Letter Agreement Amending Employment Agreement, between Edward J. Fred and the Company,           10.28
                        dated December 12, 2002.



***10.29                Letter Agreement Amending Employment Agreement, between Edward J. Fred and the Company,            N/A
                        dated January 1, 2003.

***10.30                Letter Agreement Amending Employment Agreement, between Arthur August and the Company,             N/A
                        dated January 1, 2003.



***21.1                 Subsidiaries of the Registrant.                                                                    N/A

**23.1                  Consent of Graubard Miller (included as part of its opinion).                                      N/A

*23.2                   Consent of Goldstein Golub Kessler LLP.                                                            N/A

***24.1                 Power of Attorney (included on signature page).                                                    N/A



***99.1                 Consent of Person to Become Director.                                                              N/A

</TABLE>
- -----------------------
*       Filed herewith.

**      To be filed by amendment.

***     Previously filed.



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

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

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

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

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

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

     (7)  Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
          for September 30, 2001 and incorporated herein by reference.

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

     (9)  Filed as an exhibit to the Company's Current Report on Form 8-K for
          June 27, 2002.

     (10) Filed as an exhibit to the Company's Annual Report on Form 10-K for
          December 31, 1992 and incorporated herein by reference.

     (11) Filed as an exhibit to the Company's Current Report on Form 8-K for
          April 29, 1994, as amended, and incorporated herein by reference.

                                       vi
<PAGE>


ITEM 28.  Undertakings

     The Company will:

     (1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:

          (i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

          (ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" Table in the effective registration statement.

          (iii) Include any additional or changed material information on the
plan of distribution.

     (2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

     (3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.

     (4) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company under Rule 424(b)(1) or (4), or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.

     (5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that the offering of the securities at that time as the initial bona fide
offering of those securities.

     Insofar as indemnification for liabilities arising under Securities Act may
be permitted to directors, officers and controlling persons of Registrant
pursuant to the provisions of its Articles of Incorporation, its By-Laws, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment by
Registrant for expenses incurred or paid by an officer, director or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

                                      vii
<PAGE>




                                   SIGNATURES



     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Form SB-2/A and authorized this registration
statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in Edgewood, New York on February 5, 2003.


                               CPI AEROSTRUCTURES, INC.

                            By /s/ Arthur August
                               ----------------------------------------
                               Arthur August
                               Chairman of the Board
                               (Principal Executive Officer)


     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.


/s/ Arthur August            Chairman of the Board             February 5, 2003
- ---------------------        (Principal Executive Officer)
    Arthur August

/s/ Edward J. Fred           Chief Executive Officer,          February 5, 2003
- ---------------------        President, Chief Financial
    Edward J. Fred           Officer and Secretary
                             (Principal Accounting Officer)
                             and Director

         *                   Director                          February 5, 2003
- ---------------------
    Walter Paulick


         *                   Director                          February 5, 2003
- ---------------------
    Kenneth McSweeney


*By: /s/ Edward J. Fred
    -------------------
    Edward J. Fred, as Attorney in Fact




                                      viii
<PAGE>


Table of Exhibits
<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>

*1.1                   Form of Underwriting Agreement                                                                     N/A

3.1                    Certificate of Incorporation of the Company, as amended.  (1)                                      3.1

3.1(a)                 Certificate of Amendment of Certificate of Incorporation filed on July 14, 1998.  (2)             3.1(a)

3.2                    Amended and Restated By-Laws of the Company.  (1)                                                  3.2



*4.7                   Form of Warrant issued to Underwriter                                                              N/A

*5.1                   Opinion of Graubard Miller                                                                         N/A



10.1                   1992 Stock Option Plan.  (1)                                                                       10.3

10.2                   1995 Employee Stock Option Plan.  (3)                                                              10.4

10.3                   Form of military contract.  (1)                                                                    10.7

10.4                   Asset Purchase  Agreement,  dated September 9, 1997 by and among Kolar Machine,  Inc., a          10.19
                       New  York  corporation,  Daniel  Liguori,  the  Company  and  Kolar,  Inc.,  a  Delaware
                       corporation and wholly-owned subsidiary of the Company.  (5)

10.5                   1998 Performance Equity Plan.  (2)                                                                10.28

10.6                   Performance Equity Plan 2000.  (4)                                                                10.29

10.7                   Stock Option Agreement,  dated August 14, 2001,  between Edward J. Fred and the Company.          10.35
                       (5)

10.8                   Stock Option  Agreement,  dated August 14, 2001,  between Arthur August and the Company.          10.36
                       (6)

10.9                   Employment  Agreement,  dated August 14, 2001,  between  Edward J. Fred and the Company.          10.37
                       (7)

10.10                  Employment Agreement, dated August 14, 2001, between Arthur August and the Company.  (7)          10.38

10.11                  Peaceful  Possession  Agreement,  by and among Kolar,  Inc., JP Morgan Chase Bank f/k/a/          10.38
                       the Chase  Manhattan Bank and JP Morgan Leasing,  Inc.,  dated January 24, 2002 (without
                       schedule). (8)

10.12                  Auction Sale Agreement,  among  Daley-Hodkin  Corporation,  Kolar, Inc., JP Morgan Chase          10.40
                       and JP Morgan Leasing, Inc., dated January 10, 2002.  (8)

10.13                  Amended and Restated Credit Agreement,  among the Borrowers,  the Lenders and JP Morgan,          10.43
                       dated June 25, 2002.  (9)


</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>

10.14                  Form of Replacement Term Note, between Kolar and JP Morgan, dated June 25, 2002.  (9)             10.44

10.15                  Tranche C Intercreditor and Subordination  Agreement,  among the Lenders,  the Borrowers          10.45
                       and JP Morgan, dated June 25, 2002.  (9)

10.16                  Tranche C Term Note, among the Borrowers and JP Morgan, dated June 25, 2002.  (9)                 10.46

10.17                  Amendment to Intercreditor and Subordination  Agreement,  among the Subordinated Lenders          10.47
                       (as therein defined), the Borrowers and JP Morgan, dated June 25, 2002.  (9)

10.18                  Amendment to Guarantee  and  Collateral  Agreement  among the  Borrowers  and JP Morgan,          10.48
                       dated June 25, 2002.  (9)

10.19                  Tranche C Mortgage,  Fixture  Filing and  Assignment of Leases and Rents,  between Kolar          10.49
                       and JPMorgan, dated June 25, 2002.  (9)

10.20                  Amendment to Security  Agreement,  between the Borrowers and Ralok, dated June 25, 2002.          10.50
                       (9)

10.21                  Amended and  Restated  Seller  Note,  between the  Borrowers  and Ralok,  dated June 25,          10.51
                       2002.  (9)

10.22                  CPI Seller Guaranty Amendment, among CPI and Ralok, dated June 25, 2002.  (9)                     10.52

10.23                  Seller  Mortgage  Subordination  Agreement,  between Ralok and JPMorgan,  dated June 25,          10.53
                       2002.  (9)

10.24                  Mortgage Modification Agreement, between Kolar and JPMorgan, dated June 25, 2002.  (9)            10.54

***10.25               Agreement  among Ralok,  Inc., the Company and Green & Selfler,  as Escrow Agent,  dated          10.25
                       November 26, 2002, regarding right to purchase note.



***10.26               Form of Merger & Acquisition Agreement, between the Underwriter and the Company.                  10.26



***10.27               Registration  Rights  Agreement,  between the  Registrant  and GECapital CFE, Inc. dated          10.27
                       February 26, 2002.

***10.27.1             Schedule of Omitted Document in the form of Exhibit                                             10.27.1
                       10.27, including material detail in N/A which such
                       document differs from Exhibit 10.27.

***10.28               Letter Agreement Amending Employment Agreement, between Edward J. Fred and the Company,           10.28
                       dated December 12, 2002.



***10.29               Letter Agreement Amending Employment Agreement, between Edward J. Fred and the Company,             N/A
                       dated January 1, 2003.

***10.30               Letter Agreement Amending Employment Agreement, between Arthur August and the Company,              N/A
                       dated January 1, 2003.



***21.1                Subsidiaries of the Registrant.                                                                    21.1

**23.1                 Consent of Graubard Miller (included as part of its opinion).                                       N/A

*23.2                  Consent of Goldstein Golub Kessler LLP.                                                             N/A

</TABLE>



                                       ii

<PAGE>
<TABLE>
<CAPTION>

Exhibit Number          Name of Exhibit                                                                              No. in Document
- --------------          ---------------                                                                              ---------------
<S>                     <C>                                                                                          <C>

***24.1                Power of Attorney (included on signature page).                                                     N/A



***99.1                Consent of Person to Become Director.                                                               N/A


</TABLE>

- -----------------------
*       Filed herewith.

**      To be filed by amendment.

***     Previously filed.



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

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

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

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

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

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

     (7)  Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
          for September 30, 2001 and incorporated herein by reference.

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

     (9)  Filed as an exhibit to the Company's Current Report on Form 8-K for
          June 27, 2002.

     (10) Filed as an exhibit to the Company's Annual Report on Form 10-K for
          December 31, 1992 and incorporated herein by reference.

     (11) Filed as an exhibit to the Company's Current Report on Form 8-K for
          April 29, 1994, as amended, and incorporated herein by reference.


                                      iii


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>3
<FILENAME>cpi_am2ex1.txt
<DESCRIPTION>UNDERWRITING AGREEMENT
<TEXT>
                                                                    EXHIBIT 1.1

















                             UNDERWRITING AGREEMENT

                                     Between

                            CPI AEROSTRUCTURES, INC.

                                       And

                             EARLYBIRDCAPITAL, INC.

















                            Dated: February __, 2002



<PAGE>


                                Table of Contents

                                                                          Page
                                                                          ----
1.  Purchase and Sale of Securities.........................................1
      1.1 Firm Securities...................................................1
              1.1.1  Purchase of Firm Securities............................1
              1.1.2  Delivery and Payment...................................1
      1.2  Over-Allotment Option............................................2
              1.2.1  Option Securities......................................2
              1.2.2  Exercise of Option.....................................2
              1.2.3  Payment and Delivery...................................2
      1.3  Underwriter's Warrant............................................3
              1.3.1  Warrant................................................3
              1.3.2  Delivery and Payment...................................3
2.  Representations and Warranties of the Company...........................3
      2.1  Filing of Registration Statement.................................3
      2.2  No Stop Orders, Etc..............................................3
      2.3  Disclosures in Registration Statement............................4
              2.3.1  Securities Act Representation..........................4
              2.3.2  Disclosure of Contracts................................4
              2.3.3  Prior Securities Transactions..........................4
      2.4  Changes After Dates in Registration Statement....................4
              2.4.1  No Material Adverse Change.............................4
              2.4.2  Recent Securities Transactions, Etc....................5
      2.5  Independent Accountants..........................................5
      2.6  Financial Statements.............................................5
      2.7  Authorized Capital; Options; Etc.................................5
      2.8  Valid Issuance of Securities; Etc................................6
              2.8.1  Outstanding Securities.................................6
              2.8.2  Securities Sold Pursuant to this Agreement.............6
      2.9  Registration and Anti-Dilution Rights of Third Parties...........6
      2.10 Validity and Binding Effect of Agreements........................7
      2.11 No Conflicts, Etc................................................7
      2.12 No Defaults; Violations..........................................7
      2.13 Corporate Power; Licenses; Consents..............................8
              2.13.1  Conduct of Business...................................8
              2.13.2  Transactions Contemplated Herein......................8
      2.14 Title to Property; Insurance.....................................8
      2.15 Litigation; Governmental Proceedings.............................8
      2.16 Good Standing....................................................9
      2.17 Taxes............................................................9
      2.18 Transactions Affecting Disclosure to NASD........................9
              2.18.1  Finder's Fees.........................................9
              2.18.2  Payments Within 12 Months.............................9
              2.18.3  Use of Proceeds......................................10
              2.18.4  Insiders' NASD Affiliation...........................10
      2.19 Foreign Corrupt Practices Act...................................10
      2.20 American Stock Exchange Eligibility.............................10
      2.21 Intangibles.....................................................10

<PAGE>

                            Table of Contents (cont.)

                                                                          Page
                                                                          ----
      2.22 Relations With Employees........................................11
              2.22.1  Employee Matters.....................................11
              2.22.2  Employee Benefit Plans...............................11
      2.23 Officers' Certificate...........................................11
      2.24 Lock-Up Agreements..............................................11
      2.25 Subsidiaries....................................................12
      2.26 Environmental Matters...........................................12
      2.27 Government Clearances...........................................12
      2.28 Product Liability Insurance.....................................12
      2.29 Company Not an Investment Company...............................12
      2.30 Related Party Transactions......................................12
      2.31 Audit Committee.................................................12
3.  Covenants of the Company...............................................13
      3.1  Amendments to Registration Statement............................13
      3.2  Federal Securities Laws.........................................13
              3.2.1  Compliance............................................13
              3.2.2  Filing of Final Prospectus............................13
              3.2.3  Exchange Act Registration.............................13
      3.3  Blue Sky Filings................................................13
      3.4  Delivery to the Underwriter of Prospectuses.....................14
      3.5  Events Requiring Notice to the Underwriter......................14
              3.5.1  AMEX Maintenance......................................14
      3.6  Reports to the Underwriter......................................14
              3.6.1  Periodic Reports, Etc.................................14
              3.6.2  Transfer Sheets and Weekly Position Listings..........15
      3.7  Agreements between the Underwriter and the Company..............15
              3.7.1  Merger and Acquisition Agreement......................15
              3.7.2  Underwriter's Warrant.................................15
      3.8  Payment of Expenses.............................................15
              3.8.1  General Expenses......................................15
              3.8.2  Non-Accountable Expenses..............................16
      3.9  Application of Net Proceeds.....................................16
      3.10 Delivery of Earnings Statements to Security Holders.............16
      3.11 Key Person Life Insurance.......................................17
      3.12 Stabilization...................................................17
      3.13 Internal Controls...............................................17
      3.14 Sale of Securities..............................................17
      3.15 Disclosure Controls and Procedures..............................17
4.  Conditions of the Underwriter's Obligations............................17
      4.1  Regulatory Matters..............................................17
              4.1.1  Effectiveness of Registration Statement...............17
              4.1.2  NASD Clearance........................................18
              4.1.3  No Blue Sky Stop Orders...............................18
      4.2  Company Counsel Matters.........................................18
              4.2.1  Effective Date Opinion of Counsel.....................18

                                       ii
<PAGE>

                            Table of Contents (cont.)

                                                                          Page
                                                                          ----
              4.2.2  Closing Date and Option Closing Date
                        Opinions of Counsel................................18
              4.2.3  Reliance..............................................18
      4.3  Cold Comfort Letter.............................................18
      4.4  Officers' Certificates..........................................20
              4.4.1  Officers' Certificate.................................20
              4.4.2  Secretary's Certificate...............................20
      4.5  No Material Changes.............................................20
      4.6  Delivery of Agreements..........................................21
      4.7  Opinion of Counsel for the Underwriter..........................21
5.  Indemnification........................................................21
      5.1  Indemnification of the Underwriter..............................21
              5.1.1  General...............................................21
              5.1.2  Procedure.............................................22
      5.2  Indemnification of the Company..................................23
      5.3  Contribution....................................................23
              5.3.1  Contribution Rights...................................23
              5.3.2  Contribution Procedure................................23
6.  Omitted................................................................24
7.  Board Designee.........................................................24
8.  Representations and Agreements to Survive Delivery.....................24
9.  Effective Date of This Agreement and Termination Thereof...............25
      9.1  Effective Date..................................................25
      9.2  Termination.....................................................25
      9.3  Expenses........................................................25
      9.4  Indemnification.................................................25
10. Miscellaneous..........................................................25
      10.1 Notices.........................................................25
      10.2 Headings........................................................26
      10.3 Amendment.......................................................26
      10.4 Entire Agreement................................................26
      10.5 Binding Effect..................................................27
      10.6 Governing Law, Jurisdiction.....................................27
      10.7 Execution in Counterparts.......................................27
      10.8 Waiver, Etc.....................................................27







                                      iii
<PAGE>



                              INDEX OF DEFINITIONS

Term                                                                  Section
- ----                                                                  -------

Act.....................................................................2.1
AMEX...................................................................2.20
Closing Date..........................................................1.1.2
Code ................................................................2.22.2
Commission..............................................................2.1
Common Shares.........................................................1.1.1
Company........................................................Introductory
                                                                  Paragraph
EBC............................................................Introductory
                                                                  Paragraph
Effective Date........................................................1.2.2
ERISA................................................................2.22.2
ERISA Plans..........................................................2.22.2
Exchange Act............................................................2.5
Filing Date..........................................................2.18.2
Firm Securities.......................................................1.1.1
GGK.....................................................................2.5
Insiders...............................................................2.24
Intangibles............................................................2.21
Investment Company Act.................................................2.29
Lock-up Period.........................................................2.24
Merger and Acquisition Agreement......................................3.7.1
NASD.................................................................2.18.1
Option Closing Date...................................................1.2.2
Option Securities.....................................................1.2.1
Over-allotment Option.................................................1.2.1
Preliminary Prospectus..................................................2.1
Prospectus..............................................................2.1
Public Securities.....................................................1.2.1
Registration Statement..................................................2.1
Regulations.............................................................2.1
Securities............................................................1.3.1
Subsidiary(ies)........................................................2.25
Underwriter ...................................................Introductory
                                                                  Paragraph
Underwriter's Securities..............................................1.3.1
Underwriter's Shares..................................................1.3.1
Underwriter's Warrant.................................................1.3.1


                                       iv


<PAGE>

                            CPI AEROSTRUCTURES, INC.

                             2,000,000 COMMON SHARES




                             UNDERWRITING AGREEMENT

                                                             New York, New York
                                                              February __, 2002

EarlyBirdCapital, Inc.
One State Street Plaza
New York, New York  10004

Ladies and Gentlemen:


     The undersigned, CPI Aerostructures, Inc., a New York corporation (the
"Company"), hereby confirms its agreement with EarlyBirdCapital, Inc. (being
referred to herein variously as "you", "EBC" or the "Underwriter") as follows:

     1. Purchase and Sale of Securities.

               1.1 Firm Securities.

                    1.1.1 Purchase of Firm Securities. On the basis of the
representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriter and the Underwriter agrees to purchase from the Company 2,000,000
Common Shares, par value $.001 per share ("Common Shares"), of the Company
("Firm Securities") at a purchase price (net of discounts and commissions) of
$____ per share.

                    1.1.2 Delivery and Payment. Delivery and payment for the
Firm Securities shall be made at 10:00 A.M., New York time, on or before the
third business day following the date that the Firm Securities commence trading
or at such earlier time as the Underwriter shall determine, or at such other
time as shall be agreed upon by the Underwriter and the Company, at the offices
of counsel to the Underwriter or at such other place as shall be agreed upon by
the Underwriter and the Company. The hour and date of delivery and payment
for the Firm Securities are called the "Closing Date." Payment for the Firm
Securities shall be made on the Closing Date at the Underwriter's election by
wire transfer or by certified or bank cashier's check(s) in New York Clearing
House funds, payable to the order of the Company upon delivery to the
Underwriter of a certificate of the Company's transfer agent stating that the
Firm Securities have been registered in book entry form in such name or names
and such denominations as are requested by the Underwriter. The Company shall
not be obligated to sell or deliver the Firm Securities except upon tender of
payment by the Underwriter for all the Firm Securities.

<PAGE>

               1.2 Over-Allotment Option.

                    1.2.1 Option Securities. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm
Securities, the Company hereby grants to the Underwriter an option to purchase
up to an additional 300,000 Common Shares from the Company ("Over-allotment
Option"). Such additional 300,000 Common Shares are hereinafter referred to as
the "Option Securities." The Firm Securities and the Option Securities are
hereinafter referred to collectively as the "Public Securities."  The purchase
price to be paid for the Option Securities will be the same price per Option
Security as the price per Firm Security set forth in Section 1.1.1 hereof.

                    1.2.2 Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by the Underwriter as to all
or any part of the Option Securities at any time, from time to time, within
forty-five (45) days after the effective date ("Effective Date") of the
Registration Statement (as hereinafter defined). The Underwriter will not be
under any obligation to purchase any Option Securities prior to the exercise of
the Over-allotment Option. The Over-allotment Option granted hereby may be
exercised by the giving of oral notice to the Company from the Underwriter,
which must be confirmed by a letter or telecopy setting forth the number of
Option Securities to be purchased, the date and time for delivery of and payment
for the Option Securities and stating that the Option Securities referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Securities. If such notice is given
at least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date.  If such notice
is given thereafter, the date set forth therein for such delivery and payment
will not be earlier than three full business days after the date of the notice,
unless the Underwriter and the Company agree upon an earlier date. If such
delivery and payment for the Option Securities does not occur on the Closing
Date, the date and time of the closing for such Option Securities will be as set
forth in the notice (hereinafter the "Option Closing Date"). Upon exercise of
the Over-allotment Option, the Company will become obligated to convey to the
Underwriter, and, subject to the terms and conditions set forth herein, the
Underwriter will become obligated to purchase, the number of Option Securities
specified in such notice.

                    1.2.3 Payment and Delivery. Payment for the Option
Securities will be at the Underwriter's election by wire transfer or by
certified or bank cashier's check(s) in New York Clearing House funds, payable
to the order of the Company at the offices of the Underwriter or at such other
place as shall be agreed upon by the Underwriter and the Company upon delivery
to the Underwriter of a certificate of the Company's transfer agent stating that
the Option Securities have been registered in book entry form in such name or
names and in such denominations as are requested by the Underwriter.

               1.3 Underwriter's Warrant.

                    1.3.1 Warrant. The Company hereby agrees to issue and sell
to the Underwriter (and/or its designees) on the Closing Date, for an aggregate
purchase price of $100, a warrant ("Underwriter's Warrant") for the purchase of
an aggregate of 200,000 Common Shares ("Underwriter's Shares") at an initial
exercise price equal to 110% of the initial offering price of a Common Share
(i.e., $____ per Common Share). Each of the Underwriter's Shares is identical to
the Common Shares constituting the Firm Securities. The Underwriter's Warrant
shall be exercisable for a period of four years commencing one year from the
Effective Date. The Underwriter's Warrant and the Underwriter's Shares are

                                       2
<PAGE>


hereinafter referred to collectively as the "Underwriter's Securities." The
Public Securities and the Underwriter's Securities are hereinafter referred to
collectively as the "Securities."

                    1.3.2 Delivery and Payment. Delivery and payment for the
Underwriter's Warrant shall be made on the Closing Date. The Company shall
deliver to the Underwriter, upon payment therefor, certificates evidencing the
Underwriter's Warrant in the name or names and in such authorized denominations
as the Underwriter may request.

     2. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriter as follows:

          2.1 Filing of Registration Statement. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement
and an amendment or amendments thereto, on Form SB-2 (No. 333-101902), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Securities under the Securities Act of 1933, as amended
("Act"), which registration statement and amendment or amendments have been
prepared by the Company in conformity with the requirements of the Act, and the
rules and regulations ("Regulations") of the Commission under the Act. Except as
the context may otherwise require, such registration statement, as amended, on
file with the Commission at the time the registration statement becomes
effective (including the prospectus, financial statements, schedules, exhibits
and all other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "Registration
Statement," and the form of the final prospectus dated the Effective Date or
such later date as may be determined by the Underwriter (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration
Statement has been declared effective by the Commission on the date hereof.

          2.2 No Stop Orders, Etc. No stop order suspending the effectiveness of
the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus has been issued under the Act and no proceedings for
that purpose have been instituted or are pending or, to the best knowledge of
the Company, are contemplated. No state regulatory authority has issued any
order preventing or suspending the offering or sale of the Securities in such
jurisdiction, or, to the best knowledge of the Company, threatened to institute
any proceedings with respect to such order.

          2.3 Disclosures in Registration Statement.

               2.3.1 Securities Act Representation. At the time the Registration
Statement became effective and at all times subsequent thereto up to and
including the Closing Date and the Option Closing Date, if any, the Registration
Statement and the Prospectus and any amendment or supplement thereto contained
and will contain all material statements that are required to be stated therein
in accordance with the Act and the Regulations, and conformed and will conform
in all material respects to the requirements of the Act and the Regulations;
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, during such time period and on such dates, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The representation and warranty made in this Section 2.3.1 does

                                       3

<PAGE>

not apply to statements made or statements omitted in reliance upon and in
conformity with written information furnished to the Company with respect to the
Underwriter expressly for use in the Registration Statement or Prospectus or any
amendment thereof or supplement thereto.

               2.3.2 Disclosure of Contracts. The description in the
Registration Statement and the Prospectus of contracts and other documents is
accurate in all material respects and presents fairly the information required
to be disclosed and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement that have not been so
described or filed. Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its property or business
is or may be bound or affected and that is (i) referred to in the Prospectus,
or (ii) material to the Company's business, has been duly and validly executed,
is in full force and effect in all material respects and is enforceable against
the Company and, to the Company's knowledge, the other parties thereto in
accordance with its terms, and none of such contracts or instruments has been
assigned by the Company, and neither the Company nor, to the Company's
knowledge, any other party is in default thereunder and, to the Company's
knowledge, no event has occurred that, with the lapse of time or the giving of
notice, or both, would constitute a default thereunder. None of the provisions
of such contracts or instruments violates or will result in a violation of any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court having jurisdiction over the Company or any of its
assets or businesses, including, without limitation, those relating to
environmental laws and regulations.

               2.3.3 Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of,
any person or persons controlling, controlled by, or under common control with
the Company within the three years prior to the date hereof, except as disclosed
in the Registration Statement.

          2.4 Changes After Dates in Registration Statement.

               2.4.1 No Material Adverse Change. Since the respective dates as
of which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or in the results of
operations, business or business prospects of the Company, including, but not
limited to, a material loss or interference with its business from fire, storm,
explosion, flood or other casualty, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, whether or
not arising in the ordinary course of business, (ii) there have been no
transactions entered into by the Company, other than those in the ordinary
course of business, that are material with respect to the condition, financial
or otherwise, or to the results of operations, business or business prospects of
the Company.

               2.4.2 Recent Securities Transactions, Etc. Since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, and except as may otherwise be indicated or contemplated herein or
therein, the Company has not (i) issued any securities or incurred any liability
or obligation, direct or contingent, for borrowed money; or (ii) declared or
paid any dividend or made any other distribution on or in respect to its capital
stock.

                                       4
<PAGE>

          2.5 Independent Accountants. Goldstein Golub Kessler LLP ("GGK"),
whose report is filed with the Commission as part of the Registration Statement,
are independent accountants as required by the Act and the Regulations. GGK has
not, during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Securities Exchange Act of 1934, as amended ("Exchange
Act").

          2.6 Financial Statements. The financial statements, including the
notes thereto and supporting schedules included in the Registration Statement
and Prospectus, fairly present the financial position and the results of
operations of the Company at the dates and for the periods to which they apply;
and such financial statements have been prepared in conformity with generally
accepted accounting principles, consistently applied throughout the periods
involved; and the supporting schedules included in the Registration Statement
present fairly the information required to be stated therein. The pro forma
financial information set forth in the Registration Statement and Prospectus
eflects all significant assumptions and adjustments relating to the business and
operations of the Company. The historical financial data set forth in the
Prospectus under the captions "Summary--Summary Financial Information" and
"Capitalization" fairly present in all material respects the information set
forth therein and have been compiled on a basis consistent with that of the
audited financial statements contained in the Registration Statement. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company's financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.

          2.7 Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions and adjustments stated in the Registration Statement
and the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no outstanding or authorized subscriptions, options, warrants or
other rights to purchase or otherwise acquire, or preemptive rights with respect
to the issuance or sale of, any Common Shares of the Company, including any
obligations to issue any shares pursuant to anti-dilution provisions, or any
security convertible into Common Shares of the Company, or any contracts or
commitments to issue or sell Common Shares or any such options, warrants,
rights or convertible securities.

          2.8 Valid Issuance of Securities; Etc.

               2.8.1 Outstanding Securities. All issued and outstanding
securities of the Company have been duly authorized and validly issued
and are fully paid and non-assessable; the holders thereof have no rights of
rescission with respect thereto, and are not subject to personal liability by
reason of being such holders; and none of such securities were issued in
violation of the preemptive rights of any holders of any security of the Company
or similar contractual rights granted by the Company. The outstanding options
and warrants to purchase Common Shares constitute valid and binding obligations
of the Company, enforceable in accordance with their terms. The authorized
Common Shares and outstanding options and warrants to purchase Common Shares
conform to all statements relating thereto contained in the Registration

                                       5

<PAGE>


Statement and the Prospectus. The offers and sales by the Company of the
outstanding Common Shares, options and warrants to purchase Common Shares, and
securities convertible into Common Shares, were at all relevant times registered
under the Act and registered or qualified under the applicable state securities
or Blue Sky laws or exempt from such registration or qualification requirements.

               2.8.2 Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. When issued, the
Underwriter's Warrant will constitute a valid and binding obligation of the
Company to issue and sell, upon exercise thereof and payment therefor, the
number and type of securities of the Company called for thereby and the
Underwriter's Warrant will be enforceable against the Company in accordance with
its terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.

          2.9 Registration and Anti-Dilution Rights of Third Parties. Except as
described in the Prospectus, no holders of any securities of the Company or
of any options or warrants of the Company or other rights exercisable for
or convertible or exchangeable into securities of the Company (i) have any
right to require the Company to register any such securities of the Company
under the Act, except as described in the Registration Rights Chart previously
provided to you, or (ii) have rights to have the exercise or conversion prices
of their securities lowered and/or the number of securities that they may
purchase increased as a result of the issuance by the Company of securities for
a price less than such exercise or conversion price.

          2.10 Validity and Binding Effect of Agreements. This Agreement has
been duly and validly authorized by the Company and constitutes, and the
Underwriter's Warrant and the Merger and Acquisition Agreement (as defined
below) have been duly and validly authorized by the Company and, when
executed and delivered, will constitute, the valid and binding agreements
of the Company, enforceable against the Company in accordance with their
respective terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.

          2.11 No Conflicts, Etc. The execution, delivery, and performance by
the Company of this Agreement, the Underwriter's Warrant and the Merger and
Acquisition Agreement, the consummation by the Company of the transactions
herein and therein contemplated and the compliance by the Company with the
terms hereof and thereof do not and will not, with or without the giving of
notice or the lapse of time or both, (i) result in a breach of, or conflict

                                       6
<PAGE>


with any of the terms and provisions of, or constitute a default under, or
result in the creation, modification, termination or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of, any indenture, mortgage, deed of trust, note, loan or credit agreement
or any other agreement or instrument evidencing an obligation for borrowed
money, or any other agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the property or assets of
the Company is subject; (ii) result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company; (iii) violate any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its properties or businesses; or (iv) have a material adverse
effect on any permit, license, certificate, registration, approval, consent,
license or franchise of or concerning the Company.

          2.12 No Defaults; Violations. Except as described in the Prospectus,
no material default exists in the due performance and observance of any term,
covenant or condition of any material license, contract, indenture,
mortgage, deed of trust, note, loan or credit agreement, or any other
agreement or instrument evidencing an obligation for borrowed money, or any
other material agreement or instrument to which the Company is a party or
by which the Company may be bound or to which any of the properties or
assets of the Company is subject. The Company is not in violation of any
term or provision of its certificate of incorporation or by-laws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties or businesses.

          2.13 Corporate Power; Licenses; Consents.

               2.13.1 Conduct of Business. The Company has all requisite
corporate power and authority, and has all necessary and material
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies to own or lease its
properties and conduct its business as described in the Prospectus, and the
Company is and has been doing business in compliance with all such material
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations. The disclosures in the
Registration Statement concerning the effects of federal, state and local
regulation on the Company's business as currently contemplated are correct in
all material respects and do not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

               2.13.2 Transactions Contemplated Herein. The Company has all
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained. No consent,
approval, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid authorization, issuance, sale and
delivery of the Securities and the consummation of the transactions and
agreements contemplated by this Agreement, the Underwriter's Warrant, the Merger
and Acquisition Agreement and the Prospectus, except with respect to
applicable federal and state securities laws.

                                       7
<PAGE>


          2.14 Title to Property; Insurance. The Company has valid and
defensible title to, or valid and enforceable leasehold estates in, all items of
real and personal property (tangible and intangible) owned or leased by it, free
and clear of all liens, encumbrances, claims, security interests, defects and
restrictions of any material nature whatsoever, other than those referred to in
the Prospectus (including the financial statements and notes thereto), purchase
money security interests, and liens for taxes not yet due and payable. The
Company has adequately insured its properties against loss or damage by fire,
theft, damage, destruction, acts of vandalism or terrorism or other casualty and
maintains, in adequate amounts, such other insurance as is usually maintained by
companies engaged in the same or similar business.

          2.15 Litigation; Governmental Proceedings. Except as set forth in the
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company's knowledge, threatened against, or involving the properties or
business of, the Company that might materially and adversely affect the
financial position, prospects, value or the operation of the properties or
the business of the Company, or that questions the validity of the capital
stock of the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to, or in connection with, this Agreement.
There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal, domestic or foreign, naming the
Company and enjoining the Company from taking, or requiring the Company to
take, any action, or to which the Company, its properties or business is
bound or subject.

          2.16 Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of the state of
its incorporation. The Company is duly qualified and licensed and in good
standing as a foreign corporation in each jurisdiction in which ownership or
leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have
a material adverse effect on the financial position, prospects or value or the
operation of the properties or the business of the Company.

          2.17 Taxes. The Company has filed all returns (as hereinafter defined)
required to be filed with taxing authorities prior to the date hereof or has
duly obtained extensions of time for the filing thereof. The Company has paid
all taxes (as hereinafter defined) shown as due on such returns that were filed
and has paid all taxes imposed on or assessed against the Company. The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements. No issues have been raised (and
are currently pending) by any taxing authority in connection with any of the
returns or taxes asserted as due from the Company, and no waivers of statutes of
limitation with respect to the returns or collection of taxes have been given by
or requested from the Company. The term "taxes" mean all federal, state, local,
foreign, and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other taxes, fees,
assessments, or charges of any kind whatever, together with any interest and any
penalties, additions to tax, or additional amounts with respect thereto. The
term "returns" means all returns, declarations, reports, statements, and other
documents required to be filed in respect to taxes.

                                       8
<PAGE>


          2.18 Transactions Affecting Disclosure to NASD.

               2.18.1 Finder's Fees. There are no claims, payments, issuances,
arrangements or understandings for services in the nature of a finder's,
consulting or origination fee with respect to the introduction of the Company to
the Underwriter or the sale of the Securities hereunder, and except for the
arrangements, agreements, understandings, payments and issuances between the
Company and the Underwriter that are described in the "Underwriting" section of
the Prospectus, there are no arrangements, agreements, understandings, payments
or issuances pursuant to which the Company will make a payment (i) to any member
of the National Association of Securities Dealers, Inc. ("NASD") or (ii) to any
person or entity that has any direct or indirect affiliation or association with
any NASD member.

               2.18.2 Payments Within 12 Months. Except as set forth on Schedule
2.18.2, and other than payments to the Underwriter, the Company has not made or
became obligated to make any direct or indirect payments (in cash, securities or
otherwise) to (i) any person, as a finder's fee, investing fee or otherwise, in
consideration of such person raising capital for the Company or introducing to
the Company persons who provided capital to the Company, (ii) any NASD member,
or (iii) any person or entity that has any direct or indirect affiliation or
association with any NASD member within the 12-month period prior to the date on
which the Registration Statement was filed with the Commission ("Filing Date")
or thereafter.

               2.18.3 Use of Proceeds. None of the net proceeds of the offering
will be paid by the Company to any participating NASD member or any affiliate
or associate of any participating NASD member, except as specifically authorized
herein.

               2.18.4 Insiders' NASD Affiliation. Except as set forth on
Schedule 2.18.4, no officer or director of the Company or owner of at least 5%
of the Company's outstanding Common Shares has any direct or indirect
affiliation or association with any NASD member. The Company will advise the
Underwriter and the NASD if it learns that any officer, director or owner of at
least 5% of the Company's outstanding Common Shares is or becomes an affiliate
or associated person of an NASD member participating in the offering.

          2.19 Foreign Corrupt Practices Act. Neither the Company nor any of its
officers, directors, employees, agents or any other person acting on their
behalf has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or any political party
or candidate for office (domestic or foreign) or any political party or
candidate for office (domestic or foreign) or other person who was, is, or may
be in a position to help or hinder the business of the Company (or assist it in
connection with any actual or proposed transaction) that (i) might subject the
Company to any damage or penalty in any civil, criminal or governmental
itigation or proceeding, (ii) if not given in the past, might have had a
material adverse effect on the assets, business or operations of the Company as
reflected in any of the financial statements contained in the Prospectus or
(iii) if not continued in the future, might adversely affect the assets,
business, operations or prospects of the Company. The Company's internal
accounting controls and procedures are sufficient to cause the Company to comply
with the Foreign Corrupt Practices Act of 1977, as amended.

                                       9
<PAGE>


          2.20 American Stock Exchange Eligibility. As of the Effective Date,
the Public Securities have been approved for listing on The American Stock
Exchange ("AMEX").

          2.21 Intangibles. The Company owns or possesses the requisite licenses
or rights to use all trademarks, service marks, service names, trade names,
patents and patent applications, copyrights and other rights (collectively,
"Intangibles") described as being licensed to or owned by it in the
Registration Statement or used by the Company in its business or relating
to products or services sold or currently or currently proposed to be sold by
the Company. The Company's Intangibles are listed on Schedule 2.21. The
Company's Intangibles that have been registered in the United States Patent
and Trademark Office have been fully maintained and are in full force and
effect. There is no claim or action by any person pertaining to, or proceeding
pending or, to the Company's knowledge, threatened relating to, and the Company
has not received any notice of conflict with the asserted rights of others that
challenges the exclusive right of the Company with respect to, any Intangibles
used in the conduct of the Company's business. To the Company's knowledge, after
due inquiry, the Intangibles and the Company's current products, services and
processes do not infringe on any Intangibles held by any third party, and no
others have infringed upon the Intangibles of the Company. The Company has in
place all confidentiality agreements with its employees, consultants and third
parties as are necessary to protect its Intangibles.

          2.22 Relations With Employees.

               2.22.1 Employee Matters. The Company has generally enjoyed a
satisfactory employer-employee relationship with its employees and is
in compliance in all material respects with all federal, state and local laws
and regulations respecting the employment of its employees and employment
practices, terms and conditions of employment and wages and hours relating
thereto. There are no pending investigations involving the Company by the U.S.
Department of Labor, or any other governmental agency responsible for the
enforcement of such federal, state and local laws and regulations. There is no
unfair labor practice charge or complaint against the Company pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or, to the Company's knowledge, threatened against
or involving the Company or any predecessor entity, and none has ever occurred.
No question concerning representation exists respecting the employees of the
Company and no collective bargaining agreement or modification thereof is
currently being negotiated by the Company. No grievance or arbitration
proceeding is pending under any expired or existing collective bargaining
agreements of the Company, if any.

               2.22.2 Employee Benefit Plans. Other than as set forth in the
Registration Statement, the Company neither maintains, sponsors nor contributes
to, nor is it required to contribute to, any program or arrangement that is an
"employee pension benefit plan," an "employee welfare benefit plan," or a,
"multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") ("ERISA Plans"). The Company does not maintain or
contribute to, and has at no time maintained or contributed to, a defined
benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction" within the meaning
of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended ("Code"), that could subject the Company to any material tax penalty for
prohibited transactions and that has not adequately been corrected. Each ERISA


                                       10
<PAGE>


Plan is in compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA Plan.
Determination letters have been received from the Internal Revenue Service with
respect to each ERISA Plan that is intended to comply with Code Section 401(a),
stating that such ERISA Plan and the attendant trust are qualified thereunder.
The Company has never completely or partially withdrawn from a "multi-employer
plan."

          2.23 Officers' Certificate. Any certificate signed by any duly
authorized officer of the Company and delivered directly to you or to your
counsel shall be deemed a representation and warranty by the Company to the
Underwriter as to the matters covered thereby and as of the date given.

          2.24 Lock-Up Agreements. The Company has caused to be duly executed
legally binding and enforceable agreements pursuant to which all of the
officers and directors of the Company (including their family members and
affiliates) (collectively, the "Insiders"), agree not to sell any Common Shares
or warrants or options to purchase, or other securities convertible into Common
Shares owned by them (either pursuant to Rule 144 of the Regulations or
otherwise) for a period of 24 months following the Effective Date ("Lock-up
Period") except (i) with the prior written consent of the Underwriter, (ii)
that the Lock-up Period for Arthur August and Maureen August shall be 13 months,
(iii) that Arthur August may sell up to 10,000 Common Shares per month in
conformity with a written plan for trading securities designed to meet the
requirements of Rule 10b5-1(c) that is reasonably satisfactory to the
Underwriter, and (iv) that no such agreements shall be required from Arthur
August's son and stepson.

          2.25 Subsidiaries. Except as set forth on Schedule 2.25, the Company
does not own an interest in any corporation, partnership, limited liability
company, joint venture, trust or other business entity. The Company has no
subsidiaries other than those subsidiaries set forth on Schedule 2.25, each
of which is a corporation duly organized and validly existing under the laws of
the jurisdiction of its incorporation (each a "Subsidiary" and  collectively the
"Subsidiaries"). The Company owns all of the capital stock of the Subsidiaries
free and clear of all liens, security interests and other encumbrances of any
nature whatsoever, except as set forth in the Prospectus. The representations
and warranties made by the Company in this Agreement shall also apply and be
true with respect to each Subsidiary, taken as a whole with the Company and all
other Subsidiaries, as if each representation and warranty contained herein made
specific reference to the Subsidiaries each time the term "Company" was used.
The Company has advised you that Kolar, Inc. is in the process of liquidating
its assets, as described in the Prospectus.

          2.26 Environmental Matters. The Company has complied in all material
respects with all applicable environmental laws.


          2.27 Government Clearances. Neither the Company nor any of its current
executive officers or engineers has ever been denied a security clearance.

          2.28 Product Liability Insurance. To its knowledge, the Company
maintains product liability insurance of the types and in the amounts typically
maintained by similar companies operating in the industry in which the Company
operates.

          2.29 Company Not an Investment Company. The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after


                                       11
<PAGE>


receipt of payment for the Securities will not be, an "investment company"
within the meaning of the Investment Company Act, and will conduct its business
in a manner so that it will not become subject to the Investment Company Act.


          2.30 Related Party Transactions. There are no business relationships
or related party transactions involving the Company or any other person required
to be described in the Prospectus that have not been described as required.

          2.31 Audit Committee. The audit committee of the Company's board of
directors is comprised of at least three directors, a majority of whom are
"independent" within the meaning of Section 10A(m)(3) of the Exchange Act
and Section 121 of the AMEX Company Guide (Listing Standards, Policies and
Regulations), and one of whom possesses the required past employment experience
as specified in Section 121B(b)(i) of the AMEX Company Guide (Listing Standards,
Policies and Requirements). From and after the consummation  of this offering,
all of the members of the audit committee shall be independent.

     3. Covenants of the Company. The Company covenants and agrees as follows:

          3.1 Amendments to Registration Statement. The Company will deliver to
the Underwriter, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Underwriter
shall reasonably object.

          3.2 Federal Securities Laws.

               3.2.1 Compliance. During the time when a Prospectus is required
to be delivered under the Act, the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof, and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriter, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Act, the Company will
notify the Underwriter and Counsel for the Underwriter promptly and prepare and
file with the Commission, subject to Section 3.1 hereof, an appropriate
amendment or supplement in accordance with Section 10 of the Act.

               3.2.2 Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance reasonably satisfactory to the Underwriter)
with the Commission pursuant to the requirements of Rule 424 of the Regulations.

               3.2.3 Exchange Act Registration. For a period of five years from
the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of Section 12 of the
Exchange Act; provided, however, that the Company shall not be in breach of this


                                       12
<PAGE>


covenant if the Company consummates a "Rule 13e-3 Transaction" (as such term is
defined in Rule 13e-3 promulgated under the Exchange Act).

          3.3 Blue Sky Filings. The Company will endeavor in good faith, in
cooperation with the Underwriter, at or prior to the time the Registration
Statement becomes effective, to qualify the Public Securities for offering and
sale under the securities laws of such jurisdictions as the Underwriter may
reasonably designate, provided that no such qualification shall be required in
any jurisdiction where, as a result thereof, the Company would be subject to
service of general process or to taxation as a foreign corporation doing
business in such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriter agrees that such
action is not at the time necessary or advisable, use all reasonable efforts to
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.

          3.4 Delivery to the Underwriter of Prospectuses. The Company will
deliver to the Underwriter, without charge, from time to time during the period
when the Prospectus is required to be delivered under the Act or the Exchange
Act, such number of copies of each Preliminary Prospectus and the Prospectus as
the Underwriter may reasonably request and, as soon as the Registration
Statement or any amendment or supplement thereto becomes effective, deliver to
the Underwriter two original executed Registration Statements, including
exhibits, and all post-effective amendments thereto and copies of all exhibits
filed therewith or incorporated therein by reference and all original executed
consents of certified experts.

          3.5 Events Requiring Notice to the Underwriter. The Company will
notify the Underwriter immediately and confirm the notice in writing (i) of the
effectiveness of the Registration Statement and any amendment thereto, (ii) of
the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose, (iii) if it becomes aware of
the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Public Securities for offering or sale in
any jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v) of
the receipt of any comments or request for any additional information from the
Commission, and (vi) of the happening of any event during the period described
in Section 3.4 hereof that, in the judgment of the Company, makes any statement
of a material fact made in the Registration Statement or the Prospectus untrue
or that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.

               3.5.1 AMEX Maintenance. For a period of five years from the date
hereof, the Company will use its best efforts to maintain the listing by the
AMEX of the Common Shares; provided, however, that the Company shall not be in
breach of this covenant if the Company consummates a "Rule 13e-3 Transaction"
(as such term is defined in Rule 13e-3 promulgated under the Securities
Exchange).


                                       13
<PAGE>

          3.6 Reports to the Underwriter.

               3.6.1 Periodic Reports, Etc. For a period of five years from the
Effective Date, the Company will promptly furnish to the Underwriter copies of
such financial statements and other periodic and special reports as the Company
from time to time files with any governmental authority or furnishes generally
to holders of any class of its securities (at substantially the same time as
such information is filed with the governmental authority or furnished to
securityholders), and promptly furnish to the Underwriter (i) a copy of each
periodic report the Company shall be required to file with the Commission, (ii)
a copy of every press release and every news item and article with respect to
the Company or its affairs that was released by the Company, (iii) a copy of
each Form 8-K or Schedules 13D, 13G, 14D-1 or 13E-4 received or prepared by the
Company, and (iv) such additional documents and information regarding the
Company and the affairs of any subsidiaries of the Company as the Underwriter
may from time to time reasonably request.

               3.6.2 Transfer Sheets and Weekly Position Listings. For a period
of five years from the Closing Date, the Company will furnish to the Underwriter
at the Company's sole expense such transfer sheets and position listings of the
Company's securities as the Underwriter may request, including the daily, weekly
and monthly consolidated transfer sheets of the transfer agent of the Company
and the weekly position listings of the Depository Trust Company.

          3.7 Agreements between the Underwriter and the Company.

               3.7.1 Merger and Acquisition Agreement. On the Closing Date, the
Company will enter into a Merger and Acquisition Agreement with EBC in the form
filed with the Commission as an exhibit to the Registration Statement providing
for a finder's fee to be paid to EBC if the Company participates in any merger,
consolidation, or other transaction in which EBC introduced the Company to the
other party for a period of five years from the Closing Date ("Merger and
Acquisition Agreement").

               3.7.2 Underwriter's Warrant. On the Closing Date, the Company
will execute and deliver the Underwriter's Warrant to the Underwriter or its
designees in the form filed as an exhibit to the Registration Statement.

          3.8 Payment of Expenses.

               3.8.1 General Expenses. The Company hereby agrees to pay on the
Closing Date and, to the extent not paid on the Closing Date, on the Option
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement, including but not limited to (i) the preparation,
printing, filing, delivery and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement and any post-effective
amendments thereto, the Prospectus and the Preliminary Prospectuses and the
printing and mailing of this Agreement and related documents, including the cost
of all copies thereof and any amendments thereof or supplements thereto supplied
to the Underwriter in quantities as may be required by the Underwriter, (ii) the
printing, engraving, issuance and delivery of the Common Shares and the
Underwriter's Warrant, including any transfer or other taxes payable thereon,
(iii) the qualification of the Public Securities under state or foreign
securities or Blue Sky laws, including the filing fees under such Blue Sky laws,
the costs of printing and mailing the "Preliminary Blue Sky Memorandum" and all
amendments and supplements thereto, the fees and disbursements of the Company's
counsel, and fees and disbursements of local counsel, if any, retained for such
purpose, (iv) filing fees, costs and expenses (including fees (equal to $5,000)


                                       14
<PAGE>

and disbursements for the Underwriter's counsel) incurred in registering the
offering with the NASD, (v) costs of placing "tombstone" advertisements in The
Wall Street Journal, The New York Times and a third publication to be selected
by the Underwriter, (vi) fees and disbursements of the transfer agent, (vii) the
Company's expenses associated with "due diligence" meetings arranged by the
Underwriter, (viii) the preparation, binding and delivery of transaction
"bibles," in quantity, form and style satisfactory to the Underwriter and
transaction lucite cubes or similar commemorative items in a style and quantity
as reasonably requested by the Underwriter, (ix) any listing of the Public
Securities on the AMEX and (x) all other costs and expenses incident to the
performance of its obligations hereunder that are not otherwise specifically
provided for in this Section 3.8.1. Notwithstanding the foregoing, the aggregate
amount of costs relating to "tombstone" advertisements and transaction lucite
cubes or similar commemorative items that the Company shall be obligated to pay
under this Section 3.8.1 shall not exceed $25,000. The Underwriter may deduct
from the net proceeds of the offering payable to the Company on the Closing
Date, or the Option Closing Date, if any, the expenses set forth herein to be
paid by the Company to the Underwriter and/or to third parties.

               3.8.2 Non-Accountable Expenses. The Company further agrees that,
in addition to the expenses payable pursuant to Section 3.8.1, it will pay to
the Underwriter a non-accountable expense allowance equal to three percent (3%)
of the gross proceeds received by the Company from the sale of the Firm
Securities and the Option Securities, of which $50,000 has been paid to date,
and the Company will pay the balance on the Closing Date and any additional
monies owed attributable to the Option Securities or otherwise on the Option
Closing Date by certified or bank cashier's check or, at the election of the
Underwriter, by deduction from the proceeds of the offering contemplated herein.
If the offering contemplated by this Agreement is not consummated for any reason
whatsoever then the following provisions shall apply: The Company's liability
for payment to the Underwriter of the non-accountable expense allowance shall be
equal to the sum of the Underwriter's actual out-of-pocket expenses (including,
but not limited to, counsel fees, "road-show" and due diligence expenses). The
Underwriter shall retain such part of the non-accountable expense allowance
previously paid as shall equal such actual out-of-pocket expenses. If the amount
previously paid is insufficient to cover such actual out-of-pocket expenses, the
Company shall remain liable for and promptly pay any other actual out-of-pocket
expenses. If the amount previously paid exceeds the amount of actual
out-of-pocket expenses, the Underwriter shall promptly remit to the Company any
such excess.

          3.9 Application of Net Proceeds. The Company will apply the net
proceeds from the offering received by it in a manner consistent with the
application described under the caption "Use of Proceeds" in the Prospectus. The
Company hereby agrees that, except as so described, without the express prior
written consent of the Underwriter the Company will not apply any net proceeds
from the offering to pay (i) any debt for borrowed funds; or (ii) any
obligations (including indebtedness, both principal and any interest thereon,
for borrowed funds and unpaid salaries, fees or other compensation) owed to any
Insider (excluding salaries or fees payable on a current basis to officers and
directors in the ordinary course of the Company's business).

          3.10 Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent certified public accountants unless required by the Act or the
Regulations, but which shall satisfy the provisions of Rule 158(a) under Section


                                       15
<PAGE>

11(a) of the Act) covering a period of at least twelve (12) consecutive months
beginning after the Effective Date.

          3.11 Key Person Life Insurance. The Company will maintain key person
life insurance in an amount not less than $1,000,000 on the life of Edward J.
Fred, and pay the annual premiums therefor and name the Company as the sole
beneficiary thereof for at least three years following the Effective Date.

          3.12 Stabilization. Neither the Company, nor, to its knowledge, any of
its employees, directors or shareholders has taken or will take, directly or
indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Public Securities.

          3.13 Internal Controls. The Company maintains and will continue to
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that: (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary in order to permit preparation of financial statements in
accordance with generally accepted accounting principles and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

          3.14 Sale of Securities. Subject to the exceptions described in
Section 2.24 hereof, the Company agrees not to permit or cause a private or
public sale or private or public offering of any of its securities (in any
manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for the time periods set forth in Section 2.24
following the Effective Date.

          3.15 Disclosure Controls and Procedures. The Company has established
and observes, and will continue to observe, disclosure controls and procedures
meeting the requirements of Rule 13a-14(c) under the Exchange Act.

     4. Conditions of the Underwriter's Obligations. The obligations of the
Underwriter to purchase and pay for the Securities, as provided herein, shall be
subject to the continuing accuracy of the representations and warranties of the
Company as of the date hereof and as of each of the Closing Date and the Option
Closing Date, if any, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof and to the performance by the
Company of its obligations hereunder and to the following conditions:

          4.1 Regulatory Matters.

               4.1.1 Effectiveness of Registration Statement. The Registration
Statement has been declared effective on the date of this Agreement and, at each
of the Closing Date and the Option Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for such purpose shall have been instituted or shall be pending or,
to the Company's knowledge, contemplated by the Commission and any request on
the part of the Commission for additional information shall have been complied
with to the reasonable satisfaction of Davis & Gilbert LLP, counsel to the
Underwriter.

                                       16
<PAGE>

               4.1.2 NASD Clearance. By the Effective Date, the Underwriter
shall have received clearance from the NASD as to the amount of compensation
allowable or payable to the Underwriter as described in the Registration
Statement.

               4.1.3 No Blue Sky Stop Orders. No order suspending the sale of
the Securities in any jurisdiction designated by the Underwriter pursuant to
Section 3.3 hereof shall have been issued on or before either the Closing Date
or the Option Closing Date, and no proceedings for that purpose shall have been
instituted or, to the Company's knowledge, shall be contemplated.

          4.2 Company Counsel Matters.

               4.2.1 Effective Date Opinion of Counsel. On the Effective Date,
the Underwriter shall have received the favorable opinion of Graubard Miller,
counsel to the Company, dated the Effective Date, addressed to the Underwriter
and in the form attached hereto as Exhibit A.

               4.2.2 Closing Date and Option Closing Date Opinions of Counsel.
On each of the Closing Date and the Option Closing Date, if any, the Underwriter
shall have received the opinion of Graubard Miller, counsel to the Company,
dated the Closing Date or the Option Closing Date, as the case may be, addressed
to the Underwriter and in form and substance satisfactory to Davis & Gilbert
LLP, counsel to the Underwriter, confirming as of the Closing Date and, if
applicable, the Option Closing Date, the statements made by Graubard Miller in
their opinion delivered on the Effective Date.

               4.2.3 Reliance. In rendering such opinions, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deem proper and to the extent specified in such opinion, if at all, upon
an opinion or opinions (in form and substance reasonably satisfactory to counsel
for the Underwriter) of other counsel reasonably acceptable to counsel for the
Underwriter, familiar with the applicable laws, and (ii) as to matters of fact,
to the extent they deem proper, on certificates or other written statements of
officers of departments of various jurisdiction having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to counsel
for the Underwriter. Any opinion relied upon by counsel for the Company, and the
opinions of counsel for the Company, shall include statements to the effect that
they may be relied upon by counsel for the Underwriter in its opinion delivered
to the Underwriter.

          4.3 Cold Comfort Letter. At the time this Agreement is executed, and
at each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Underwriter and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to Davis &
Gilbert LLP, counsel for the Underwriter, from GGK dated, respectively, as of
the date of this Agreement and as of the Closing Date and the Option Closing
Date, if any:

                        (i) confirming that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the applicable Regulations and that they have not, during the periods covered by
the financial statements included in the Prospectus, provided to the Company any


                                       17

<PAGE>

non-audit services, as such term is used in Section 10A(g) of the Exchange Act;

                        (ii) stating that in their opinion the financial
statements and the financial statement schedules of the Company included (or
incorporated by reference) in the Registration Statement and Prospectus comply
as to form in all material respects with the applicable accounting requirements
of the Act and the published Regulations thereunder;

                        (iii) stating that, based on the performance of
procedures specified by the American Institute of Certified Public Accountants
for a review of the latest available unaudited interim financial statements of
the Company (as described in Statement on Auditing Standards ("SAS") No. 71 --
"Interim Financial Information"), with an indication of the date of the latest
available unaudited interim financial statements, a reading of the latest
available minutes of the shareholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
that would lead them to believe that (a) the unaudited financial statements of
the Company included or incorporated by reference in the Registration Statement
do not comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or any material modification should
be made to the unaudited interim financial statements included in the
Registration Statement for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included or incorporated by
reference in the Registration Statement, (b) at a date not later than five days
prior to the Effective Date, Closing Date or Option Closing Date, as the case
may be, there was any change in the capital stock or long-term debt of the
Company, or any decrease in the net current assets (working capital) or
shareholders' equity of the Company as compared with amounts shown in the
September 30, 2002 balance sheet included in the Registration Statement, other
than as set forth in or contemplated by the Registration Statement, or, if there
was any decrease, setting forth the amount of such decrease, and (c) during the
period from October 1, 2002 to a specified date not later than five days prior
to the Effective Date, Closing Date or Option Closing Date, as the case may be,
there was any decrease in revenues, net earnings or net earnings per Common
Share, in each case as compared with the corresponding period in the preceding
year and as compared with the corresponding period in the preceding quarter,
other than as set forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such decrease;

                        (iv)  Setting forth, at a date not later than five days
prior to the Effective Date, the amount of liabilities of the Company (including
a break-down of commercial paper and notes payable to banks);

                        (v) stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
and work sheets, of the Company with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and

                                       18
<PAGE>

                        (vi) statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.

          4.4 Officers' Certificates.

               4.4.1 Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, the Underwriter shall have received a certificate,
that is true and correct in fact, of the Company signed by the Chief Executive
Officer and the Secretary of the Company, dated the Closing Date or the Option
Closing Date, as the case may be, respectively, to the effect that the Company
has in all material respects performed all covenants and complied with all
conditions required by this Agreement to be performed or complied with by the
Company prior to and as of the Closing Date, or the Option Closing Date, as the
case may be, and that the conditions set forth in Section 4.5 hereof have been
satisfied in all material respects as of such date and that, as of Closing Date
and the Option Closing Date, as the case may be, the representations and
warranties of the Company set forth in Section 2 hereof are true and correct. In
addition, the Underwriter will have received such other and further certificates
of officers of the Company as the Underwriter may reasonably request.

               4.4.2 Secretary's Certificate. At each of the Closing Date and
the Option Closing Date, if any, the Underwriter shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, (iv)
all correspondence between the Company or its counsel and the AMEX concerning
listing of the Securities on the AMEX and (vi) as to the incumbency of the
officers of the Company. The documents referred to in such certificate shall be
attached to such certificate.

          4.5 No Material Changes. Prior to and on each of the Closing Date and
the Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material change in the assets,
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) there shall have been no
transaction, not in the ordinary course of business, entered into by the Company
from the latest date as of which the financial condition of the Company is set
forth in the Registration Statement and Prospectus that is materially adverse to
the Company, taken as a whole, (iii) the Company shall not be in default under
any provision of any instrument relating to any outstanding indebtedness which
default would have a material adverse effect on the Company, (iv) no material
amount of the assets of the Company shall have been pledged or mortgaged, except
as set forth in the Registration Statement and Prospectus, (v) no action suit or
proceeding, at law or in equity, shall have been pending or threatened against
the Company or affecting any of its property or business before or by any court
or federal or state commission, board or other administrative agency wherein an
unfavorable decision, ruling or finding may materially adversely affect the
business, operations, prospects or financial condition or income of the Company,
except as set forth in the Registration Statement and Prospectus, (vi) no stop
order shall have been issued under the Act and no proceedings therefor shall
have been initiated or threatened by the Commission, and (vii) the Registration
Statement and the Prospectus and any amendments or supplements thereto contain

                                       19
<PAGE>


all material statements that are required to be stated therein in accordance
with the Act and the Regulations and conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

          4.6 Delivery of Agreements. The Company has delivered to the
Underwriter an executed copy of the Underwriter's Warrant and an executed copy
of the Merger and Acquisition Agreement.

          4.7 Opinion of Counsel for the Underwriter. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to Davis & Gilbert LLP, counsel to the Underwriter, and you shall have received
from such counsel a favorable opinion, dated the Closing Date and the Option
Closing Date, if any, with respect to such of these proceedings as you may
reasonably require. On or prior to the Effective Date, the Closing Date and the
Option Closing Date, as the case may be, counsel for the Underwriter shall have
been furnished such documents, certificates and opinions as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 4.7, or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions herein contained.

     5. Indemnification.

          5.1 Indemnification of the Underwriter.

               5.1.1 General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, its directors,
officers, agents and employees and each person, if any, who controls the
Underwriter ("controlling person") within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever (including but not limited to any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, or any claims whatsoever, commenced or
threatened, whether arising out of any action between the Underwriter and the
Company or between the Underwriter and any third party or otherwise) to which
they or any of them may become subject under the Act, the Exchange Act or any
other statute or at common law or otherwise or under the laws of foreign
countries (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), arising out of or based upon
any untrue statement or alleged untrue statement of a material fact (i)
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time each may be amended and supplemented, and
including any information deemed to be a part thereto pursuant to Rule 430A or
Rule 434 of the Regulations); (ii) contained in any post-effective amendment or
amendments or any new registration statement and prospectus in which is included
securities of the Company issued or issuable upon exercise of the Underwriter's
Warrant; (iii) contained in any application or other document or written
communication (in this Section 5 collectively called "application") executed by
the Company or based upon written information furnished by the Company in any
jurisdiction in order to qualify the Securities under the securities laws
thereof or filed with the Commission, any state securities commission or agency,
the NASD (including Nasdaq and NASD Regulation, Inc.) or any securities

                                       20
<PAGE>


exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
unless such statement or omission was made in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
the Underwriter by or on behalf of the Underwriter expressly for use in any
Preliminary Prospectus, the Registration Statement or Prospectus, or any
amendment or supplement thereof, or in any application, as the case may be. The
Company agrees promptly to notify the Underwriter of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the issue and sale of the Securities
or in connection with the Registration Statement or Prospectus.

               5.1.2 Procedure. If any action is brought against the Underwriter
or a controlling person in respect of which indemnity may be sought against the
Company pursuant to Section 5.1.1, the Underwriter shall promptly notify the
Company in writing of the institution of such action and the Company shall
assume the defense of such action, including the employment and fees of counsel
(subject to the approval of the Underwriter) and payment of actual expenses. The
Underwriter or controlling person shall have the right to employ its or their
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of the Underwriter or such controlling person unless (i) the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action, or (ii) the Company shall not
have employed counsel to have charge of the defense of such action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them that are different from or additional to
those available to the Company (in which case the Company shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the fees and expenses of not more than one
additional firm of attorneys selected by the Underwriter and/or controlling
person shall be borne by the Company. Notwithstanding anything to the contrary
contained herein, if the Underwriter or controlling person shall assume the
defense of such action as provided above, the Company shall have the right to
approve the terms of any settlement of such action which approval shall not be
unreasonably withheld.

          5.2 Indemnification of the Company. The Underwriter agrees to
indemnify and hold harmless the Company against any and all loss, liability,
claim, damage and expense described in the foregoing indemnity from the Company
to the Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions directly relating to the
transactions effected by the Underwriter in connection with this offering made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application in reliance upon, and in
strict conformity with, written information furnished to the Company with
respect to the Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company based on any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereto or
any application, and in respect of which indemnity may be sought against the
Underwriter, the Underwriter shall have the rights and duties given to the
Company, and the Company shall have the rights and duties given to the
Underwriter, by the provisions of Section 5.1.2.

                                       21
<PAGE>

          5.3 Contribution.

               5.3.1 Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriter, as incurred, in such proportions that the Underwriter is
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Public Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that the Underwriter has
otherwise been required to pay in respect of such losses, liabilities, claims,
damages and expenses. For purposes of this Section, each director, officer and
employee of the Underwriter, and each person, if any, who controls the
Underwriter within the meaning of Section 15 of the Act, shall have the same
rights to contribution as the Underwriter.

               5.3.2 Contribution Procedure. Within fifteen days after receipt
by any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability that it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding that was effected
by the party seeking contribution without the written consent of such
contributing party. The contribution provisions contained in this Section are
intended to supersede, to the extent permitted by law, any right to contribution
under the Act, the Exchange Act or otherwise available.

     6. Omitted.

     7. Board Designee. For a period of five years from the Effective Date, the
Company will appoint a designee of EBC (reasonably acceptable to the Company) as
a member of the Board of Directors of the Company. Such designee shall receive
no more or less compensation than is paid to other non-management directors of
the Company (excluding the Chairman of the Audit Committee) and shall be


                                       22
<PAGE>


entitled to be reimbursed for all reasonable out-of-pocket expenses incurred in
attending such meetings, including but not limited to food, lodging and
transportation. To the extent permitted by law, the Company will agree to
indemnify EBC and its designee for the actions of such designee as a director of
the Company. In addition, the Company will obtain and maintain a liability
insurance policy affording coverage for the acts of its officers and directors
in an amount not less than $3,000,000 and will include EBC's designee as an
insured under such policy. If EBC has not exercised its option to designate a
member of the Company's Board of Directors, EBC shall have the right to send a
representative (who need not be the same individual from meeting to meeting) to
observe each meeting of the Board of Directors. The Company agrees to give EBC
written notice of each such meeting and to provide EBC with an agenda and
minutes of the meeting no later than it gives such notice and provides such
items to the other directors, and reimburse the representative of EBC for its
reasonable out-of-pocket expenses incurred in connection with its attendance at
the meeting, including but not limited to, food, lodging and transportation and
any fees paid to the directors for attending such meeting.

     8. Representations and Agreements to Survive Delivery. Except as the
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriter and Company, including the indemnity agreements
contained in Section 5 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Underwriter,
the Company or any controlling person, and shall survive termination of this
Agreement or the issuance and delivery of the Securities to the Underwriter
until the earlier of the expiration of any applicable statute of limitations and
the seventh anniversary of the later of the Closing Date or the Option Closing
Date, if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.

     9. Effective Date of This Agreement and Termination Thereof.

          9.1 Effective Date. This Agreement shall become effective on the
Effective Date at the time that the Registration Statement is declared
effective.

          9.2 Termination. You shall have the right to terminate this Agreement
at any time prior to any Closing Date, (i) if any domestic or international
event or act or occurrence has materially disrupted, or in your opinion will in
the immediate future materially disrupt, general securities markets in the
United States; or (ii) if trading on the New York Stock Exchange, the American
Stock Exchange or in the over-the-counter market shall have been suspended, or
minimum or maximum prices for trading shall have been fixed, or maximum ranges
for prices for securities shall have been fixed, or maximum ranges for prices
for securities shall have been required on the over-the-counter market by the
NASD or by order of the Commission or any other government authority having
jurisdiction, or (iii) if the United States shall have become involved in a war
or major hostilities, or (iv) if a banking moratorium has been declared by a New
York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared that materially and adversely impacts the United
States securities market, or (vi) if the Company shall have sustained a material
loss by fire, flood, accident, hurricane, earthquake, theft, sabotage, terrorism
or other calamity or malicious act that, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Securities, or (vii) if the Company has breached any of its
representations or warranties, or failed to perform any of its obligations

                                       23
<PAGE>

hereunder, or (ix) if the Underwriter shall have become aware after the date
hereof of such a material adverse change in the condition (financial or
otherwise), business, or prospects of the Company, or such adverse material
change in general market conditions as in the Underwriter's judgment would make
it impracticable to proceed with the offering, sale and/or delivery of the
Securities or to enforce contracts made by the Underwriter for the sale of the
Securities.

          9.3 Expenses. In the event that this Agreement shall not be carried
out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms hereof, the obligations of the Company
to pay the expenses related to the transactions contemplated herein shall be
governed by Section 3.8 hereof.

          9.4 Indemnification. Notwithstanding any contrary provision contained
in this Agreement, any election hereunder or any termination of this Agreement,
and whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.

     10. Miscellaneous.

          10.1 Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed

                  If to the Underwriter:

                           EarlyBirdCapital, Inc.
                           One State Street Plaza
                           24th Floor
                           New York, New York  10004
                           Attention:  Steven Levine
                           Telecopier:  (212) 425-5861

                  Copy to:

                           Davis & Gilbert LLP
                           1740 Broadway
                           New York, New York 10019
                           Attention:  Ralph W. Norton, Esq.
                           Telecopier:  (212) 974-6969

                  If to the Company:

                           CPI Aerostructures, Inc.
                           200A Executive Drive
                           Edgewood, New York  11717
                           Attention:  Edward J. Fred
                           Telecopier:  (631) 586-5840

                                       24
<PAGE>

                  Copy to:

                           Graubard Miller
                           600 Third Avenue
                           New York, New York 10016
                           Attention:  David Alan Miller, Esq.
                           Telecopier:  (212) 818-8881

          10.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.

          10.3 Amendment. This Agreement may be amended only by a written
instrument executed by each of the parties hereto.

          10.4 Entire Agreement. This Agreement (together with the other
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.

          10.5 Binding Effect. This Agreement shall inure solely to the benefit
of and shall be binding upon, the Underwriter, the Company and the controlling
persons, directors and officers referred to in Section 5 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provisions herein
contained.

          10.6 Governing Law, Jurisdiction. This Agreement shall be governed by
and construed and enforced in accordance with the law of the State of New York,
without giving effect to principles of conflicts of law. The Company hereby
agrees that any action, proceeding or claim against it arising out of or
relating in any way to this Agreement shall be brought and enforced in the
courts of the State of New York or the United States District Court for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any such process or summons to be served upon the Company may be served
by transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
10.1 hereof. Such mailing shall be deemed personal service and shall be legal
and binding upon the Company in any action, proceeding or claim. The parties
agree that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.

          10.7 Execution in Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become

                                       25
<PAGE>

effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.

          10.8 Waiver, Etc. The failure of any of the parties hereto at any time
to enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
























                                       26
<PAGE>

     If the foregoing correctly sets forth the understanding between the
Underwriter and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.

                            Very truly yours,

                            CPI AEROSTRUCTURES, INC.



                         By:__________________________________________________
                              Name:     Edward J. Fred
                              Title:    President and Chief Executive Officer


Accepted as of the date first above written.

New York, New York

EARLYBIRDCAPITAL, INC.



By:_________________________________________
Name:    Steven Levine
Title:   Managing Director








                                       27

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.7
<SEQUENCE>4
<FILENAME>cpi_am2ex47.txt
<DESCRIPTION>FORM OF WARRANT TO BE ISSUED TO UNDERWRITER
<TEXT>
                                                                     EXHIBIT 4.7

THE REGISTERED HOLDER OF THIS WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT
WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS HEREIN PROVIDED.

NOT EXERCISABLE PRIOR TO FEBRUARY __, 2004. VOID AFTER 5:00 P.M. EASTERN TIME,
FEBRUARY __, 2008.


                                     WARRANT

                            For the Purchase of up to

                            ___________ Common Shares

                            CPI AEROSTRUCTURES, INC.

                            (A New York Corporation)


1. Warrant.

         THIS CERTIFIES THAT, in consideration of $100.00 duly paid by or on
behalf of ____________________________ ("Holder"), as registered owner of this
Warrant, to CPI Aerostructures, Inc. ("Company"), Holder is entitled, at any
time or from time to time at or after February __, 2004 ("Commencement Date"),
and at or before 5:00 p.m., Eastern Time, February __, 2008 ("Expiration Date"),
but not thereafter, to subscribe for, purchase and receive, in whole or in part,
up to _________________ (_________) Common Shares of the Company, $.001 par
value ("Common Shares"), pursuant to which the Company has registered Common
Shares. This Warrant is one of a series of similar warrants of like tenor to
purchase up to 200,000 Common Shares (collectively, the "Warrants"). The Common
Shares are sometimes referred to herein as the "Securities." If the Expiration
Date is a day on which banking institutions are authorized by law to close, then
this Warrant may be exercised on the next succeeding day that is not such a day
in accordance with the terms herein. During the period ending on the Expiration
Date, the Company agrees not to take any action that would terminate the
Warrant. This Warrant is initially exercisable at $___ per Common Share
purchased; provided, however, that upon the occurrence of any of the events
specified in Section 6 hereof, the rights granted by this Warrant, including the
exercise price and the number of Common Shares to be received upon such
exercise, shall be adjusted as therein specified. The term "Exercise Price"
shall mean the initial exercise price or the adjusted exercise price, depending
on the context.

2. Exercise.

     2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price in cash or

<PAGE>

by certified check or official bank check for the Securities being purchased. If
the subscription rights represented hereby shall not be exercised at or before
5:00 p.m., Eastern time, on the Expiration Date, this Warrant shall become and
be void without further force or effect, and all rights represented hereby shall
cease and expire.

     2.2 Legend. Each certificate for Securities purchased under this Warrant
shall bear a legend as follows unless such Securities have been registered under
the Securities Act of 1933, as amended:

          "The securities represented by this certificate have not been
          registered under the Securities Act of 1933, as amended ("Act"), or
          applicable state law. The securities may not be offered for sale, sold
          or otherwise transferred except pursuant to an effective registration
          statement under the Act, or pursuant to an exemption from registration
          under the Act and applicable state law."

     2.3 Conversion Right.

          2.3.1 Determination of Amount. In lieu of the payment of the Exercise
Price in the manner required by Section 2.1, the Holder shall have the right
(but not the obligation) to convert any exercisable but unexercised portion of
this Warrant into securities ("Conversion Right") as follows: Upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without payment
by the Holder of any of the Exercise Price in cash) that number of Common Shares
equal to the quotient obtained by dividing (x) the "Value" (as defined below),
at the close of trading on the next to last trading day immediately preceding
the exercise of the Conversion Right, of the portion of the Warrant being
converted by (y) the Market Price (as defined below) at that same time. The
"Value" of the portion of the Warrant being converted shall equal the remainder
derived from subtracting (a) the Exercise Price multiplied by the number of
Common Shares underlying the portion of the Warrant being converted from (b) the
Market Price of the Common Shares multiplied by the number of Common Shares
underlying the portion of the Warrant being converted. As used in this Section
2.3, the term "Market Price" at any date shall be deemed to be the last reported
sale price of the Common Shares on such date, or, in case no such reported sale
takes place on such day, the average of the last reported sale price for the
three immediately preceding trading days, in either case as officially reported
by the principal securities exchange on which the Common Shares are listed or
admitted to trading, or, if the Common Shares are not listed or admitted to
trading on any national securities exchange or if any such exchange on which the
Common Shares are listed is not the principal trading market, the last reported
sale price as furnished by the NASD through the Nasdaq National Market or
SmallCap Market, or, if applicable, the OTC Bulletin Board or successor trading
medium, or if the Common Shares are not listed or admitted to trading on any of
the foregoing markets, or similar organization, as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it.

                                       2
<PAGE>

          2.3.2 Mechanics of Conversion. The Conversion Right may be
exercised by the Holder on any business day on or after the Commencement Date
and not later than the Expiration Date by delivering the Warrant with a duly
executed exercise form attached hereto with the conversion right section
completed to the Company, exercising the Conversion Right and specifying the
total number of Common Shares that the Holder will purchase pursuant to such
Conversion Right.

3. Transfer.

     3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant prior to the Commencement Date to anyone other than (i)
an officer or partner of such Holder, (ii) an officer of EarlyBirdCapital, Inc.
("EBC" or the "Underwriter") or an officer or partner of any Selected Dealer
that executed the Selected Dealer Agreement between the Underwriter and the
members of the selling group ("Selected Dealer") in connection with the
Company's public offering with respect to which this Warrant has been issued, or
(iii) any Selected Dealer. On and after the Commencement Date, transfers to
others may be made subject to compliance with or exemptions from applicable
securities laws. In order to make any permitted assignment, the Holder must
deliver to the Company the assignment form attached hereto duly executed and
completed, together with the Warrant and payment of all transfer taxes, if any,
payable in connection therewith. The Company shall immediately transfer this
Warrant on the books of the Company and shall execute and deliver a new Warrant
or Warrants of like tenor to the appropriate assignee(s) expressly evidencing
the right to purchase the aggregate number of Common Shares purchasable
hereunder or such portion of such number as shall be contemplated by any such
assignment.

     3.2 Restrictions Imposed by the Act. This Warrant and the Securities
underlying this Warrant shall not be transferred unless and until (i) the
Company has received the opinion of counsel for the Holder that this Warrant or
the Securities, as the case may be, may be transferred pursuant to an exemption
from registration under the Act and applicable state law, the availability of
which is established to the reasonable satisfaction of the Company (the Company
hereby agreeing that an opinion of Graubard Miller in form and substance
reasonably satisfactory to the Company shall be deemed satisfactory evidence of
the availability of an exemption), or (ii) a registration statement relating to
such Warrant or Securities, as the case may be, has been filed by the Company
and declared effective by the Securities and Exchange Commission ("Commission")
and compliance with applicable state law.

4. New Warrants to be Issued.

     4.1 Partial Exercise, Conversion or Transfer. Subject to the restrictions
in Section 3 hereof, this Warrant may be exercised, converted or assigned in
whole or in part. In the event of the exercise, conversion or assignment hereof
in part only, upon surrender of this Warrant for cancellation, together with the
duly executed exercise or assignment form and funds (except in the case of
conversion) sufficient to pay any Exercise Price and/or transfer tax, the

                                       3
<PAGE>

Company shall cause to be delivered to the Holder without charge a new Warrant
of like tenor to this Warrant in the name of the Holder evidencing the right of
the Holder to purchase the aggregate number of Common Shares purchasable
hereunder as to which this Warrant has not been exercised or assigned.


     4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of
reasonably satisfactory indemnification, the Company shall execute and deliver a
new Warrant of like tenor and date. Any such new Warrant executed and delivered
as a result of such loss, theft, mutilation or destruction shall constitute a
substitute contractual obligation on the part of the Company.

5. Registration Rights.

     5.1 Demand Registration.

          5.1.1 Grant of Right. The Company, upon written demand ("Initial
Demand Notice") of the Holder(s) of at least 51% of the Warrants and/or the
underlying Common Shares ("Majority Holders"), agrees to register, on one
occasion, all or any portion of the Warrants requested by the Majority Holders
in the Initial Demand Notice and all of the Securities underlying such Warrants
(collectively the "Registrable Securities"). On such occasion, the Company will
file a registration statement covering the Registrable Securities within sixty
(60) days after receipt of the Initial Demand Notice and use its best efforts to
have the registration statement declared effective promptly thereafter. If the
Company fails to comply with the provisions of this Section 5.1.1, the Company
shall, in addition to any other equitable or other relief available to the
Holder(s), be liable for any and all incidental, special and consequential
damages sustained by the Holder(s). The demand for registration may be made at
any time during a period of four years beginning one year from the effective
date of the registration statement on Form SB-2 (No. 333-101902) pursuant to
which the Company has registered Common Shares ("Effective Date"). The Company
covenants and agrees to give written notice of its receipt of any Initial Demand
Notice by any Holder(s) to all other registered Holders of the Warrants and/or
the Registrable Securities within ten (10) days from the date of the receipt of
any such Initial Demand Notice.

          5.1.2 Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel selected by the
Holders to represent them in connection with the sale of the Registrable
Securities. The Company agrees to use its best efforts to cause the filing
required herein to become effective promptly and to qualify or register the
Registrable Securities in such States as are reasonably requested by the
Holder(s); provided, however, that in no event shall the Company be required to
register the Registrable Securities in a State in which such registration would
cause (i) the Company to be obligated to register or license to do business in
such State or submit to general service of process in such State, or (ii) the
principal Shareholders of the Company to be obligated to escrow their shares of
capital stock of the Company. The Company shall cause any registration statement

                                       4
<PAGE>

filed pursuant to the demand right granted under Section 5.1.1 to remain
effective until all of the Registrable Securities covered by such registration
statement have been sold.

     5.2 "Piggy-Back" Registration.

          5.2.1 Grant of Right. In addition to the demand right of registration,
the Holders of the Warrants shall have the right at any time for a period of six
(6) years commencing one year from the Effective Date to include the Registrable
Securities as part of any other registration of securities filed by the Company
(other than in connection with a transaction contemplated by Rule 145(a)
promulgated under the Act or pursuant to Form S-8 or any equivalent form);
provided, however, that if, in the written determination of the Company's
managing underwriter or underwriters, if any, for such offering, the inclusion
of the Registrable Securities, when added to the securities being registered by
the Company or the selling shareholder(s), will exceed the maximum amount of the
Company's securities that can be marketed (i) at a price reasonably related to
their then current market value, or (ii) without materially and adversely
affecting the entire offering, the Company shall nevertheless register all or
any portion of the Registrable Securities required to be so registered but such
Registrable Securities shall not be sold by the Holders until 90 days after the
registration statement for such offering has become effective and provided
further that, if any securities are registered for sale on behalf of other
shareholders in such offering and such shareholders have not agreed to defer
such sale until the expiration of such 90 day period, the number of securities
to be sold by all shareholders in such public offering during such 90 day period
shall be apportioned pro rata among all such selling shareholders, including all
holders of the Registrable Securities, according to the total amount of
securities of the Company owned by said selling shareholders, including all
holders of the Registrable Securities.

          5.2.2 Terms. The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, but the Holders shall pay any and all
underwriting commissions and the expenses of any legal counsel selected by the
Holders to represent them in connection with the sale of the Registrable
Securities. In the event of such a proposed registration, the Company shall
furnish the then Holders of outstanding Registrable Securities with not less
than thirty (30) days written notice prior to the proposed date of filing of
such registration statement. Such notice to the Holders shall continue to be
given for each registration statement filed by the Company until such time as
all of the Registrable Securities have been sold by the Holder. The holders of
the Registrable Securities shall exercise the "piggy-back" rights provided for
herein by giving written notice, within twenty (20) days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggyback"
rights to remain effective until all of the Registrable Securities covered by
such registration statement have been sold.

     5.3 General Terms.

          5.3.1 Indemnification. The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls any such Holder within the

                                       5
<PAGE>

meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), against all loss, claim, damage, expense
or liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company
has agreed to indemnify the Underwriter contained in Section 5 of the
Underwriting Agreement between the Underwriter and the Company, dated the
Effective Date. The Holder(s) of the Registrable Securities to be sold pursuant
to such registration statement, and their successors and assigns, shall
severally, and not jointly, indemnify the Company against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf of
such Holders, or their successors or assigns, in writing, for specific inclusion
in such registration statement to the same extent and with the same effect as
the provisions contained in Section 5 of the Underwriting Agreement pursuant to
which the Underwriter has agreed to indemnify the Company.

          5.3.2 Exercise of Warrants. Nothing contained in this Warrant shall be
construed as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the effectiveness
thereof.

          5.3.3 Documents Delivered to Holders. The Company shall furnish to
each Holder participating in any of the foregoing offerings and to each
underwriter of any such offering, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company shall also deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
to the managing underwriter copies of all correspondence between the Commission
and the Company, its counsel or auditors and all memoranda relating to
discussions with the Commission or its staff with respect to the registration
statement and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities

                                       6
<PAGE>

Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times as any such Holder shall reasonably request, provided that
all such persons sign a confidentiality agreement.

          5.3.4 Underwriting Agreement. The Company shall enter into an
underwriting agreement with the managing underwriter(s) selected by the Majority
Holders whose Registrable Securities are being registered pursuant to Section
5.1, which managing underwriter shall be reasonably satisfactory to the Company.
Such agreement shall be reasonably satisfactory in form and substance to the
Company, each Holder and such managing underwriter, and shall contain such
representations, warranties and covenants by the Company and such other terms as
are customarily contained in agreements of that type used by the managing
underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Registrable Securities and may, at their
option, require that any or all of the representations, warranties and covenants
of the Company to or for the benefit of such underwriters shall also be made to
and for the benefit of such Holders. Such Holders shall not be required to make
any representations or warranties to or agreements with the Company or the
underwriter except as they may relate to such Holders, their shares and their
intended methods of distribution.

          5.3.5 Documents to be Delivered by Holder(s). Each of the Holder(s)
participating in any of the foregoing offerings shall furnish to the Company a
completed and executed questionnaire provided by the Company requesting
information customarily sought of selling securityholders.

6. Adjustments.

     6.1 Adjustments to Exercise Price and Number of Securities. The Exercise
Price and the number of Common Shares underlying the Warrant shall be subject to
adjustment from time to time as hereinafter set forth:

          6.1.1 Stock Dividends, Recapitalization, Reclassification, Split-Ups.
If after the date hereof, and subject to the provisions of Section 6.2 below,
the number of outstanding Common Shares is increased by a stock dividend payable
in Common Shares or by a split-up, recapitalization or reclassification of
Common Shares or other similar event, then, on the effective date thereof, the
number of Common Shares issuable on exercise of this Warrant shall be increased
in proportion to such increase in outstanding shares. For example, if the
Company declares a two-for-one stock dividend and at the time of such dividend
the Warrant is for the purchase of 1,000 Common Shares at $10.00 per share, upon
effectiveness of the dividend, the Warrant will be adjusted (disregarding for
purposes of this example that adjustments shall be rounded to the nearest cent,
as provided in Section 6.1.3) to allow for the purchase of 2,000 shares at $5.00
per share.

                                       7
<PAGE>

          6.1.2 Aggregation of Shares. If after the date hereof, and subject to
the provisions of Section 6.2, the number of outstanding Common Shares is
decreased by a consolidation, combination or reclassification of Common Shares
or other similar event, then, upon the effective date thereof, the number of
Common Shares issuable on exercise of the Warrant shall be decreased in
proportion to such decrease in outstanding shares.


          6.1.3 Adjustments in Exercise Price. Whenever the number of Common
Shares purchasable upon the exercise of this Warrant is adjusted, as provided in
this Section 6.1, the Exercise Price shall be adjusted (to the nearest cent) by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of Common Shares
purchasable upon the exercise of this Warrant immediately prior to such
adjustment, and (y) the denominator of which shall be the number of Common
Shares so purchasable immediately thereafter.

          6.1.4 Replacement of Securities upon Reorganization, etc. In case of
any reclassification or reorganization of the outstanding Common Shares other
than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects
the par value of such Common Shares, or in the case of any merger or
consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or reorganization of the
outstanding Common Shares), or in the case of any sale or conveyance to another
corporation or entity of the property of the Company as an entirety or
substantially as an entirety in connection with which the Company is dissolved,
the Holder of this Warrant shall have the right thereafter (until the expiration
of the right of exercise of this Warrant) to receive upon the exercise hereof,
for the same aggregate Exercise Price payable hereunder immediately prior to
such event, the kind and amount of shares of stock or other securities or
property (including cash) receivable upon such reclassification, reorganization,
merger or consolidation, or upon a dissolution following any such sale or other
transfer, by a Holder of the number of Common Shares of the Company obtainable
upon exercise of this Warrant immediately prior to such event; and if any
reclassification also results in a change in Common Shares covered by Section
6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1,
6.1.2, 6.1.3 and this Section 6.1.4. The provisions of this Section 6.1.4 shall
similarly apply to successive reclassifications, reorganizations, mergers or
consolidations, sales or other transfers.

          6.1.5 Changes in Form of Warrant. This form of Warrant need not be
changed because of any change pursuant to this Section, and Warrants issued
after such change may state the same Exercise Price and the same number of
Common Shares as are stated in the Warrants initially issued pursuant to this
Agreement. The acceptance by any Holder of the issuance of new Warrants
reflecting a required or permissive change shall not be deemed to waive any
rights to a prior adjustment or the computation thereof.

     6.2 Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of Common Shares upon the exercise
or transfer of this Warrant, nor shall it be required to issue scrip or pay cash
in lieu of any fractional interests, it being the intent of the parties that all

                                       8
<PAGE>

fractional interests shall be eliminated by rounding any fraction up or down to
the nearest whole number of Common Shares or other securities, properties or
rights.

7. Reservation and Listing. The Company shall at all times reserve and keep
available out of its authorized Common Shares, solely for the purpose of
issuance upon exercise of the Warrants, such number of Common Shares or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all Common Shares and other securities issuable
upon such exercise shall be duly and validly issued, fully paid and
non-assessable and not subject to preemptive rights of any shareholder. As long
as the Warrants shall be outstanding, the Company shall use its reasonable best
efforts to cause all Common Shares issuable upon exercise of the Warrants to be
listed (subject to official notice of issuance) on all securities exchanges (or,
if applicable on Nasdaq) on which the Common Shares issued to the public in
connection herewith are then listed and/or quoted.

8. Certain Notice Requirements.

     8.1 Holder's Right to Receive Notice. Nothing herein shall be construed as
conferring upon the Holders the right to vote or consent or to receive notice as
a shareholder for the election of directors or any other matter, or as having
any rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen (15) days prior
to the date fixed as a record date or the date of closing the transfer books for
the determination of the shareholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.

     8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall take a record of the holders of its Common Shares for the
purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) the Company shall
offer to all the holders of its Common Shares any additional shares of capital
stock of the Company or securities convertible into or exchangeable for shares
of capital stock of the Company, or any option, right or warrant to subscribe
therefor, or (iii) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business shall be proposed.

     8.3 Notice of Change in Exercise Price. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 6 hereof,
send notice to the Holders of such event and change ("Price Notice"). The Price

                                       9
<PAGE>

Notice shall describe the event causing the change and the method of calculating
same and shall be certified as being true and accurate by the Company's
President and Chief Financial Officer.

     8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgement of receipt to the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of the Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.

9. Miscellaneous.

     9.1 Amendments. The Company and the Underwriter may from time to time
supplement or amend this Warrant without the approval of any of the Holders in
order to cure any ambiguity, to correct or supplement any provision contained
herein that may be defective or inconsistent with any other provisions herein,
or to make any other provisions in regard to matters or questions arising
hereunder that the Company and the Underwriter may deem necessary or desirable
and that the Company and the Underwriter deem shall not adversely affect the
interest of the Holders. All other modifications or amendments shall require the
written consent of the party against whom enforcement of the modification or
amendment is sought.

     9.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.

     9.3 Entire Agreement. This Warrant (together with the other agreements and
documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.

     9.4 Binding Effect. This Warrant shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.

     9.5 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the laws of the State
of New York, without giving effect to principles of conflict of laws. The
Company hereby agrees that any action, proceeding or claim against it arising
out of, or relating in any way to this Warrant shall be brought and enforced in

                                       10
<PAGE>

the courts of the State of New York or of the United States of America for the
Southern District of New York, and irrevocably submits to such jurisdiction,
which jurisdiction shall be exclusive. The Company hereby waives any objection
to such exclusive jurisdiction and that such courts represent an inconvenient
forum. Any process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address described in Section
8 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the Company in any action, proceeding or claim. The Company agrees
that the prevailing party(ies) in any such action shall be entitled to recover
from the other party(ies) all of its reasonable attorneys' fees and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation therefor.

     9.6 Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Warrant shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Warrant or any provision hereof or the right of the Company or any Holder
to thereafter enforce each and every provision of this Warrant. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions of this
Warrant shall be effective unless set forth in a written instrument executed by
the party or parties against whom or which enforcement of such waiver is sought;
and no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.

     9.7 Exchange Agreement. As a condition of the Holder's receipt and
acceptance of this Warrant, Holder agrees that, at any time prior to the
complete exercise of this Warrant by Holder, if the Company and
EarlyBirdCapital, Inc. enter into an agreement ("Exchange Agreement") pursuant
to which they agree that all outstanding Warrants will be exchanged for
securities or cash or a combination of both, then the Holder shall agree to such
exchange and become a party to the Exchange Agreement.







                                       11
<PAGE>



     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of the __ day of February, 2003.


                                CPI AEROSTRUCTURES, INC.



                                By:__________________________________
                                   Edward J. Fred
                                   President and Chief Financial Officer




























                                       12

<PAGE>


Form to be used to exercise Warrant:

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


Date:_________________, 200__

     The undersigned hereby elects irrevocably to exercise the within Warrant
and to purchase _________ Common Shares of CPI Aerostructures, Inc. and hereby
makes payment of $____________ (at the rate of $_________ per Common Share) in
payment of the Exercise Price pursuant thereto. Please issue the Common Shares
as to which this Warrant is exercised in accordance with the instructions given
below.

                                       or

     The undersigned hereby elects irrevocably to exercise the within Warrant
and to purchase _________ Common Shares of CPI Aerostructures, Inc. by surrender
of the unexercised portion of the within Warrant (with a "Value" of $_______
based on a "Market Price" of $__________). Please issue the Common Shares as to
which this Warrant is exercised in accordance with the instructions given below.

                                                ------------------------------
                                                Signature

     NOTICE: The signature to this form must correspond with the name as written
upon the face of the within Warrant in every particular without alteration or
enlargement or any change whatsoever.


                   INSTRUCTIONS FOR REGISTRATION OF SECURITIES


Name              ________________________________________________________
                                    (Print in Block Letters)

Address           ________________________________________________________


<PAGE>


Form to be used to assign Warrant:


                                   ASSIGNMENT


     (To be executed by the registered Holder to effect a transfer of the within
Warrant):

     FOR VALUE RECEIVED,__________________________________ does hereby sell,
assign and transfer unto ______________________ the right to purchase
____________ Common Shares of CPI Aerostructures, Inc. ("Company") evidenced by
the within Warrant and does hereby authorize the Company to transfer such right
on the books of the Company.

Dated:___________________, 200_


                                              ------------------------------
                                              Signature

- ------------------------------
Signature Guaranteed

     NOTICE: The signature to this form must correspond with the name as written
upon the face of the within Warrant in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank, other
than a savings bank, or by a trust company or by a firm having membership on a
registered national securities exchange.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>5
<FILENAME>cpi_am2ex51.txt
<DESCRIPTION>OPINION OF GRAUBARD MILLER
<TEXT>
                                                                     EXHIBIT 5.1


                                 GRAUBARD MILLER
                                600 Third Avenue
                               New York, NY 10016


                                February 5, 2003


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

                  Re:      Registration Statement on Form SB-2
                           -----------------------------------

Ladies and Gentlemen:

     Reference is made to the Registration Statement on Form SB-2 ("Registration
Statement") filed by CPI Aerostructures, Inc. ("Company") under the Securities
Act of 1933, as amended ("Securities Act"), with respect to up to an aggregate
of 2,500,000 common shares, par value $.001 per share ("Common Shares") to be
offered by the Company in the Company's public offering ("Public Offering").

     We have examined such documents and considered such legal matters as we
have deemed necessary and relevant as the basis for the opinion set forth below.
With respect to such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as reproduced
or certified copies and the authenticity of the originals of those latter
documents. As to questions of fact material to this opinion, we have, to the
extent deemed appropriate, relied upon certain representations of certain
officers of the Company.

     Based upon the foregoing, it is our opinion that the Common Shares to be
issued by the Company in this Public Offering, when sold in the manner provided
in the Registration Statement, will be legally issued, fully paid and
nonassessable.

     In giving this opinion, we have assumed that all certificates for the
Company's Common Shares will, prior to their issuance, be duly executed on
behalf of the Company by the Company's transfer agent and registered by the
Company's registrar, if necessary, and will conform, except as to denominations,
to specimens which we have examined.

     We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, to the use of our name as your counsel, and to all
reference made to us in the Registration Statement and in the Prospectus forming
a part thereof. In giving this consent, we do not hereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act, or the rules and regulations promulgated thereunder.

                                         Very truly yours,

                                         /s/ Graubard Miller
                                         GRAUBARD MILLER


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>6
<FILENAME>cpi_am2ex232.txt
<DESCRIPTION>CONSENT OF GOLDSTEIN GOLUB KESSLER
<TEXT>
                                                                    EXHIBIT 23.2


                       CONSENT OF INDEPENDENT ACCOUNTANTS

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

     We hereby consent to the use in this Registration Statement on Form SB-2 of
our report dated March 29, 2002, except for the last paragraph of Note 5, as to
which the date is April 12, 2002 and Note 6(a) and the first paragrpah of Note
13, as to which the date is June 22, 2002 relating to the consolidated financial
statements of CPI Aerostructures, Inc. and Subsidiary as of December 31, 2001
and for each of the two years in the preiod then ended which appear in such
Registration Statement. We also consent to the reference of our Firm under the
captions "Experts" in such Registration Statement.

/s/ Goldstein Golub Kessler LLP

GOLDSTEIN GOLUB KESSLER LLP

New York, New York
February 5, 2003


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