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<SEC-DOCUMENT>0000950136-06-009553.txt : 20061114
<SEC-HEADER>0000950136-06-009553.hdr.sgml : 20061114
<ACCEPTANCE-DATETIME>20061114164649
ACCESSION NUMBER:		0000950136-06-009553
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20060930
FILED AS OF DATE:		20061114
DATE AS OF CHANGE:		20061114

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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11398
		FILM NUMBER:		061216082

	BUSINESS ADDRESS:	
		STREET 1:		200A EXECUTIVE DR
		CITY:			EDGEWOOD
		STATE:			NY
		ZIP:			11717
		BUSINESS PHONE:		5165865200
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>file1.htm
<TEXT>
<HTML>
<HEAD>
<TITLE>
</TITLE>
</HEAD>
<BODY>
<PRE><PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period                          Commission File Number 1-11398
ended September 30, 2006

                            CPI AEROSTRUCTURES, INC.
             (Exact name of registrant as specified in its charter)

              New York                                    11-2520310
   (State or other jurisdiction             (IRS Employer Identification Number)
of incorporation or organization)

    60 Heartland Blvd., Edgewood, NY                         11717
(Address of principal executive offices)                  (zip code)

                                 (631) 586-5200
               (Registrant's telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):

Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [X]

As of November 10, 2006, the number of shares of common stock, par value $.001
per share, outstanding was 5,447,042.

<PAGE>

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

Part I:  Financial Information:

     Item 1 - Condensed Financial Statements:

     Condensed Balance Sheets as of September 30, 2006 (Unaudited) and
        December 31, 2005                                                     3

     Condensed Statements of Operations for the Three Months and Nine
        Months ended September 30, 2006 (Unaudited) and 2005 (Unaudited)      4

     Condensed Statements of Cash Flows for the Nine Months ended
        September 30, 2006 (Unaudited) and 2005 (Unaudited)                   5

     Notes to Condensed Financial Statements (Unaudited)                      6

     Item 2 - Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                  12

     Item 3 - Quantitative and Qualitative Disclosures About Market
        Risk                                                                 18

     Item 4 - Controls and Procedures                                        18

Part II.  Other Information

     Item 1A. - Risk Factors                                                 19

     Item 2 - Unregistered Sales of Equity Securities                        19

     Item 6 - Exhibits                                                       19

     Signatures and Certifications                                           20


                                                                               2

<PAGE>

PART I: FINANCIAL INFORMATION:

ITEM 1 - FINANCIAL STATEMENTS:

                                                        CONDENSED BALANCE SHEETS
- --------------------------------------------------------------------------------

<FONT size="1">

                                                                                    SEPTEMBER 30,   DECEMBER 31,
                                                                                         2006           2005
                                                                                     (UNAUDITED)      (NOTE 1)
                                                                                    -------------   ------------

ASSETS
Current Assets:
   Cash                                                                              $    85,412     $   877,182
   Accounts receivable                                                                 2,016,089       1,849,796
   Costs and estimated earnings in excess of billings on uncompleted
       contracts                                                                      26,272,509      28,389,202
   Prepaid expenses and other current assets                                             136,008         342,165
   Refundable income taxes                                                               878,987              --
                                                                                     -----------     -----------
      TOTAL CURRENT ASSETS                                                            29,389,005      31,458,345
Plant and equipment, net                                                                 894,110         962,209
Other assets                                                                             249,775         267,230
                                                                                     -----------     -----------
      TOTAL ASSETS                                                                   $30,532,890     $32,687,784
                                                                                     ===========     ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                  $ 3,347,959     $ 4,559,181
   Accrued expenses and other current liabilities                                        541,899         648,521
   Current portion of long-term debt                                                      57,568          87,617
   Line of credit                                                                        350,000              --
   Income taxes payable                                                                       --         133,110
                                                                                     -----------     -----------
      TOTAL CURRENT LIABILITIES                                                        4,297,426       5,428,429
Long-term debt, net of current portion                                                     2,474          42,188
Other liabilities                                                                         87,630          54,895
                                                                                     -----------     -----------
      TOTAL LIABILITIES                                                                4,387,530       5,525,512
                                                                                     ===========     ===========
Commitments
Shareholders' Equity:
   Common stock - $.001 par value; authorized 50,000,000 shares, issued 5,478,057
      and 5,475,057 shares, respectively, and
      outstanding 5,447,042 and 5,444,042 shares, respectively                             5,478           5,475
   Additional paid-in capital                                                         23,028,237      22,768,135
    Retained earnings                                                                  3,432,501       4,709,518
   Treasury stock, 31,015 shares of common stock (at cost)                              (320,856)       (320,856)
                                                                                     -----------     -----------
      TOTAL SHAREHOLDERS' EQUITY                                                      26,145,360      27,162,272
                                                                                     -----------     -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                     $30,532,890     $32,687,784
                                                                                     ===========     ===========
</FONT>

                                     See Notes to Condensed Financial Statements


                                                                               3

<PAGE>

                                              CONDENSED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------

<FONT size="1">

                                                             FOR THE THREE MONTHS ENDED    FOR THE NINE MONTHS ENDED
                                                                    SEPTEMBER 30,                SEPTEMBER 30,
                                                                2006          2005           2006            2005
                                                                     (UNAUDITED)                  (UNAUDITED)
                                                             --------------------------   ---------------------------

Revenue                                                      $4,412,931     $6,452,246    $11,900,141    $19,010,780
Cost of sales                                                 3,651,385      4,769,256     11,077,893     13,763,040
                                                             ----------     ----------    -----------    -----------
Gross profit                                                    761,546      1,682,990        822,248      5,247,740
Selling, general and administrative expenses                    774,123        803,492      2,756,265      2,570,393
                                                             ----------     ----------    -----------    -----------
Income (loss) before provision for (benefit from)
   income taxes                                                 (12,577)       879,498     (1,934,017)     2,677,347
                                                             ----------     ----------    -----------    -----------
Provision for (benefit from) income taxes                            --        331,000       (657,000)     1,041,000
                                                             ----------     ----------    -----------    -----------
Net income (loss)                                            $  (12,577)    $  548,498    $(1,277,017)   $ 1,636,347
Income (loss) per common share - basic                       $     0.00     $     0.10    $     (0.23)   $      0.30
Income (loss) per common share - diluted                     $     0.00     $     0.09    $     (0.23)   $      0.27
                                                             ==========     ==========    ===========    ===========
Shares used in computing earnings (loss) per common share:
   Basic                                                      5,447,042      5,421,650      5,446,526      5,419,411
   Diluted                                                    5,447,042      6,115,014      5,446,526      6,120,977
                                                             ----------     ----------    -----------    -----------
</FONT>

                                     See Notes to Condensed Financial Statements


                                                                               4

<PAGE>

                                              CONDENSED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

<FONT size="1">

FOR THE NINE MONTHS ENDED SEPTEMBER 30,                                         2006          2005
- -------------------------------------------------------------------------   -----------   -----------

                                                                                   (UNAUDITED)
Cash flows from operating activities:
   Net income (loss)                                                        $(1,277,017)  $ 1,636,347
   Adjustments to reconcile net income to net
   cash used in operating activities:
      Depreciation and amortization                                             158,633       143,685
      Deferred rent                                                              21,822        41,172
      Stock-based compensation expense                                          241,054            --
      Tax benefit from stock option exercise                                     (4,600)           --
      Deferred portion of provision for income taxes                            (48,000)       36,000
      Changes in operating assets and liabilities:
         Increase in accounts receivable                                       (166,293)     (116,745)
         (Increase) decrease in costs and estimated earnings in excess of
            billings on uncompleted contracts                                 2,116,692    (1,841,575)
         Decrease in prepaid expenses and other assets                          223,612        48,484
         Increase in refundable income taxes                                   (878,987)           --
         Decrease in accounts payable, accrued expenses and other current
            liabilities                                                      (1,258,931)   (1,000,878)
         Increase (decrease) in income taxes payable                           (133,110)      330,000
                                                                            -----------   -----------
            Net cash used in operating activities                            (1,005,125)     (723,510)
                                                                            -----------   -----------
Cash used in investing activities - purchase of plant and equipment             (90,532)     (255,581)
                                                                            -----------   -----------
Cash flows from financing activities:
   Net repayment of long-term debt                                              (69,763)      (51,570)
   Proceeds from line of credit                                                 350,000            --
   Proceeds from exercise of stock options                                       19,050        47,591
   Tax benefit from stock option exercise                                         4,600            --
                                                                            -----------   -----------
            Net cash provided by (used in) financing activities                 303,887        (3,979)
                                                                            -----------   -----------
Net decrease in cash                                                           (791,770)     (983,070)
Cash at beginning of period                                                     877,182     1,756,350
                                                                            -----------   -----------
Cash at end of period                                                       $    85,412   $   773,280
                                                                            ===========   ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
   Interest                                                                 $     8,891   $    10,739
                                                                            ===========   ===========
   Income taxes                                                             $   403,093   $   675,000
                                                                            ===========   ===========
</FONT>

                                     See Notes to Condensed Financial Statements


                                                                               5

<PAGE>

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

1.   INTERIM FINANCIAL           The financial statements of CPI Aerostructures,
     STATEMENTS:                 Inc. ("the Company") as of September 30, 2006
                                 and for the three and nine months ended
                                 September 30, 2006 and 2005 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 its results of operations and cash flows.
                                 The results of operations for such interim
                                 periods are not necessarily indicative of the
                                 results to be obtained for a full year.

                                 The balance sheet at December 31, 2005 has been
                                 derived from the audited financial statements
                                 at that date but does not include all of the
                                 information and notes required by accounting
                                 principles generally accepted in the United
                                 States for complete financial statements. For
                                 further information, refer to the financial
                                 statements and notes thereto included in the
                                 Company's Annual Report on Form 10-K for the
                                 year ended December 31, 2005.

                                 Certain reclassifications have been made in the
                                 prior period financial statements to conform to
                                 the current period presentation.

2.   STOCK-BASED COMPENSATION    Effective January 1, 2006, the Company began
                                 recording compensation expense associated with
                                 stock options in accordance with Statement of
                                 Financial Accounting Standard ("SFAS") No.
                                 123R, "Share-Based Payment." Prior to January
                                 1, 2006 the Company accounted for stock-based
                                 compensation related to stock options under the
                                 recognition and measurement principles of
                                 Accounting Principles Board Opinion No. 25;
                                 therefore, the Company measured compensation
                                 expense for its stock option plans using the
                                 intrinsic value method, that is, as the excess,
                                 if any, of the fair market value of the
                                 Company's stock at the grant date over the
                                 amount required to be paid to acquire the
                                 stock, and provided the disclosures required by
                                 SFAS No. 123 and 148. The Company has adopted
                                 the modified prospective transition method
                                 provided under SFAS 123R, and as a result, has
                                 not retroactively adjusted results from prior
                                 periods. Under this transition method,
                                 compensation expense associated with stock
                                 options in the three and nine month periods
                                 ended September 30, 2006 includes: (1) period
                                 expense related to the remaining unvested
                                 portion of all stock option awards granted
                                 prior to January 1, 2006, based on the grant
                                 date fair value estimated in accordance with
                                 the original provisions of SFAS 123; and (2)
                                 expense related to all stock option awards
                                 granted subsequent to January 1, 2006, based on
                                 the grant date fair value estimated in
                                 accordance with the provisions of SFAS 123R.

                                 As a result of the adoption of SFAS 123R, the
                                 Company's net loss for the nine months ended
                                 September 30, 2006 includes approximately
                                 $252,000 of non-cash compensation expense
                                 related to the Company's stock options. The
                                 Company recorded no compensation expense
                                 related to stock options for the three month
                                 period ended September 30, 2006. The non-cash
                                 compensation expense related to all of the
                                 Company's stock-based compensation arrangements
                                 is recorded as a component of selling, general
                                 and administrative expense. Prior to the
                                 Company's adoption of SFAS 123R, the Company
                                 presented tax benefits resulting from the
                                 exercise of stock options as cash flows from
                                 operating activities on the Company's
                                 consolidated statements of cash flows. SFAS
                                 123R requires cash flows resulting from tax
                                 deductions in excess of the cumulative
                                 compensation cost recognized for options
                                 exercised (excess tax benefits) be classified
                                 as cash inflows from financing activities and
                                 cash outflows from operating activities.


                                                                               6

<PAGE>

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

                                 In November 2005, the FASB issued FASB Staff
                                 Position No. FAS 123R-3, "Transition Election
                                 Related to Accounting for the Tax Effects of
                                 Share-Based Payment Awards." The Company has
                                 elected to adopt the alternative transition
                                 method provided in the FASB Staff Position for
                                 calculating the tax effects of share-based
                                 compensation pursuant to SFAS 123R. The
                                 alternative transition method includes a
                                 simplified method to establish the beginning
                                 balance of the additional paid-in capital pool
                                 related to the tax effects of employee
                                 share-based compensation, which is available to
                                 absorb tax deficiencies recognized subsequent
                                 to the adoption of SFAS 123R.

                                 In April 1992, the Company adopted the 1992
                                 Stock Option Plan (the "1992 Plan"). The 1992
                                 Plan, for which 83,334 common shares are
                                 reserved for issuance, provides for the
                                 issuance of either incentive stock options or
                                 nonqualified stock options to employees,
                                 consultants, directors or others who provide
                                 services to the Company. The options may not be
                                 exercised more than five years from the date of
                                 issuance. No more options may be granted under
                                 the 1992 Plan.

                                 In 1995, the Company adopted the 1995 Stock
                                 Option Plan (the "1995 Plan"), as amended, for
                                 which 200,000 common shares are reserved for
                                 issuance. The 1995 Plan provides for the
                                 issuance of either incentive stock options or
                                 nonqualified stock options to employees,
                                 consultants, directors 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 former 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
                                 Performance Equity 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, directors 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 prior to the date
                                 of issuance, except for incentive stock options
                                 granted to the Company's former 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 Performance
                                 Equity Plan 2000 (the "2000 Plan"). The 2000
                                 Plan, as amended, reserved 1,230,000 common
                                 shares for issuance. The 2000 Plan provides for
                                 the issuance of either incentive stock options
                                 or nonqualified stock options to employees,
                                 consultants, directors 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 prior to the date
                                 of issuance, except for incentive stock options
                                 granted to the Company's former president,
                                 which are exercisable at 110% of the closing
                                 price of the Company's shares on the date of
                                 issuance.

                                 At September 30, 2006, the Company had 285
                                 options available for grant under the 1995
                                 Plan, 666 options available for grant under the
                                 1998 Plan, and 313,025 options available for
                                 grant under the 2000 Plan.

                                 The estimated fair value of each option award
                                 granted was determined on the date of grant
                                 using the Black-Scholes option valuation model.
                                 The following weighted-


                                                                               7

<PAGE>

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

                                 average assumptions were used for option grants
                                 during the nine month period ended September
                                 30, 2006 and 2005:

                                                             September 30,
                                                             2006     2005
                                                           -------   ------
                                 Risk-free interest rate     4.2%    3.9%
                                 Expected volatility          22%     32%
                                 Dividend yield                0%      0%

                                 Expected option term      5 years   5years

                                 The risk free interest rate for the nine months
                                 ended September 30, 2006 and 2005 is based on
                                 the 5 year U.S. Treasury note rate on the day
                                 of grant. The expected volatility computation
                                 is based on the average of the volatility over
                                 the most recent two year period. The Company
                                 has never paid a dividend, and is not expected
                                 to pay a dividend in the foreseeable future,
                                 therefore the dividend yield is assumed to be
                                 zero.

                                 A summary of the status of the Company's stock
                                 option plans as of September 30, 2006 and
                                 changes during the period is as follows:

<FONT size="1">

                                                                         Weighted        Weighted
                                                                          average   average remaining    Aggregate
                                                                         Exercise      contractual       Intrinsic
                                 Fixed Options                Options      Price     term (in years)       Value
                                 -------------------------   ---------   --------   -----------------   ----------

                                 Outstanding
                                    at beginning of period   1,130,085     $4.89
                                 Granted during period          85,000      8.57
                                 Exercised                      (3,000)     6.35
                                 Forfeited/Expired                  --
                                                             ---------     -----           ----         ----------
                                 Outstanding and vested
                                    at end of period         1,212,085     $5.14           4.55         $1,542,050
                                                             =========     =====           ====         ==========
</FONT>

                                 The weighted-average fair value of each option
                                 granted during the nine months ended September
                                 30, 2006 and 2005, estimated as of the grant
                                 date using the Black-Scholes option valuation
                                 model was $2.45 and $3.49, respectively.

                                 As of September 30, 2006 there was no
                                 unrecognized compensation cost related to
                                 non-vested stock option awards.

                                 The net income for the three months and nine
                                 months ended September 30, 2005 does not
                                 include any compensation charges related to
                                 options granted to employees. The following
                                 table illustrates the pro forma effect on net
                                 loss and loss per share assuming the Company
                                 had applied the fair value recognition
                                 provisions of SFAS 123 instead of the intrinsic
                                 value method under APB No. 25 to stock-based
                                 employee compensation for the three month and
                                 nine month periods ended September 30, 2005:


                                                                               8

<PAGE>

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

<FONT size="1">

                                                                          Three Months   Nine Months
                                                                          ------------   -----------

                                 Net income, as reported                    $548,498      $1,636,347
                                 Stock compensation expense, net of tax       76,287         406,918
                                                                            --------      ----------
                                 Net income, pro forma                      $472,211      $1,229,429
                                                                            ========      ==========
</FONT>

<FONT size="1">

                                 Basic net income per common share, as reported     $0.10   $0.30
                                 Diluted net income per common share, as reported   $0.09   $0.27
                                 Basic net income per common share, pro forma       $0.09   $0.23
                                 Diluted net income per common share, pro forma     $0.08   $0.20
</FONT>

                                 Cash received from stock option exercises for
                                 the nine months ended September 30, 2006 and
                                 2005 was $19,050 and $47,591, respectively. The
                                 income tax benefit from stock option exercises
                                 totaled $4,600 and $73,000 for the nine months
                                 ended September 30, 2006 and 2005,
                                 respectively.


                                                                               9

<PAGE>

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

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

<FONT size="1">

                                                                            September 30, 2006
                                                                 ---------------------------------------
                                                                     U.S.
                                                                  Government    Commercial      Total
                                                                 -----------   -----------   -----------

                                 Costs incurred on uncompleted
                                    contracts                    $44,486,743   $15,251,819   $59,738,562
                                 Estimated earnings               26,665,989     6,639,980    33,305,969
                                                                 -----------   -----------   -----------
                                                                  71,152,732    21,891,799    93,044,531
                                 Less billings to date            47,132,716    19,639,306    66,772,022
                                                                 -----------   -----------   -----------
                                 COSTS AND ESTIMATED EARNINGS
                                    IN EXCESS OF BILLINGS ON
                                    UNCOMPLETED CONTRACTS        $24,020,016   $ 2,252,493   $26,272,509
                                                                 ===========   ===========   ===========
</FONT>

<FONT size="1">

                                                                            December 31, 2005
                                                                 ---------------------------------------
                                                                     U.S.
                                                                  Government    Commercial      Total
                                                                 -----------   -----------   -----------

                                 Costs incurred on uncompleted
                                    contracts                    $41,075,851   $14,400,603   $55,476,454
                                 Estimated earnings               25,430,030     6,273,397    31,703,427
                                                                 -----------   -----------   -----------
                                                                  66,505,881    20,674,000    87,179,881
                                 Less billings to date            39,878,934    18,911,745    58,790,679
                                                                 -----------   -----------   -----------
                                 COSTS AND ESTIMATED EARNINGS
                                    IN EXCESS OF BILLINGS ON
                                    UNCOMPLETED CONTRACTS        $26,626,947   $ 1,762,255   $28,389,202
                                                                 ===========   ===========   ===========
</FONT>


                                                                              10

<PAGE>

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

4. INCOME PER COMMON SHARE:      Basic income per common share is computed using
                                 the weighted average number of shares
                                 outstanding. Diluted income per common share
                                 for the three month and nine month periods
                                 ended September 30, 2005 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 693,364 and
                                 701,566 were used in the calculation of diluted
                                 income per common share in the three month and
                                 nine month periods ended September 30, 2005,
                                 respectively. Incremental shares of 648,388 and
                                 640,186 were not included in the diluted
                                 earnings per share calculations for the three
                                 month and nine month periods ended September
                                 30, 2005, respectively, as their exercise price
                                 was in excess of the Company's average stock
                                 price for the respective period and,
                                 accordingly, these shares are not assumed to be
                                 exercised for the diluted earnings per share
                                 calculation, as they would be anti-dilutive.
                                 Incremental shares of 1,407,085 were not
                                 included in the diluted earnings per share
                                 calculation at September 30, 2006 because of
                                 the reported net loss, and accordingly their
                                 effect would be anti-dilutive.

5. CREDIT FACILITY:              In September 2003, the Company entered into a
                                 three year, $5.0 million revolving credit
                                 facility with JP Morgan Chase Bank ("Chase
                                 Facility"), secured by the assets of the
                                 Company. The facility specified interest rates
                                 ranging between the Prime Rate and 225 basis
                                 points over LIBOR, depending on certain terms
                                 and conditions.

                                 In October 2006, the Chase Facility was amended
                                 and restated to provide for a $1.0 million
                                 revolving credit facility, secured by the
                                 assets of the Company. The facility specifies
                                 an interest rate equal to the greater of (a)
                                 the prime rate and (b) the federal funds rate ,
                                 plus 0.5%. The facility expires on December 31,
                                 2006.

                                 As of September 30, 2006, the Company had
                                 borrowed $350,000 under the Chase Facility.


                                                                              11

<PAGE>

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

The following discussion should be read in conjunction with the Company's
Condensed Financial Statements and footnotes thereto contained in this report.

FORWARD LOOKING STATEMENTS

The statements discussed in this report include forward looking statements that
involve risks and uncertainties, including the timely delivery and acceptance of
the Company's products and the other risks detailed from time to time in the
Company's reports filed with the Securities and Exchange Commission.

BUSINESS OPERATIONS

     The operations of CPI Aerostructures, Inc. consist of the design and
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 we are not
currently pursuing business in this sector. Our strategy for growth includes
de-emphasizing our commercial operations and concentrating on sales to the
government and to prime contractors.

     We compete with other prime contractors to win contracts through a process
of competitive bidding. Notwithstanding defense budget increases and the
Department of Defense's commitment to maintaining support for aging aircraft, as
affirmed in the DoD's 2006 Quadrennial Defense Review, there has been a
significant slowdown in government contract awards as well as releases under
previously awarded contracts. Faced with the uncertainties of appropriations and
time of contract awards and releases under previously awarded contracts, a key
element of our strategy has been to expand our activities to include operating
as a subcontractor to leading aerospace prime contractors. While the slowdown in
government contract awards also has affected these prime contractors, because
they are able to bid on and receive contract awards for different programs than
we are, we believe that pursuing such opportunities will enable us to access
programs that we would not otherwise be able to given our smaller size and
resources. By increasing our customer base, we are positioned to take advantage
of additional market opportunities and reduce the impact of the slowdown in
government contract awards and releases. These subcontracting opportunities have
begun to materialize, and we have been awarded some subcontracts. We currently
have proposals submitted to multiple prime contractors, and while we cannot
predict the timing of awards, our outstanding proposals are significant.

     After winning a contract, the length of the contract varies but is
typically between one and two years for U.S. government contracts (although our
T-38 contract and our C-5 TOP contract are for periods of 10 years and 7 years,
respectively), and up to 10 years for commercial contracts. Our one commercial
contract has an indefinite life. Except in cases where contract terms permit us
to bill on a progress basis, we must incur upfront costs in producing assemblies
and bill our customers upon delivery. Because of the upfront costs incurred, the
timing of our billings and the nature of the percentage-of-completion method of
accounting described below, there can be a significant disparity between the
periods in which (a) costs are expended, (b) revenue and earnings are recorded
and (c) cash is received.


                                                                              12

<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF 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. When the current estimates
of total contract revenue and contract costs indicate a loss, a provision for
the entire estimated loss on the contract is recorded. 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. As a
result, there can be a significant disparity between earnings as reported and
actual cash received by us during any reporting period. We continually evaluate
all of the issues related to the assumptions, risks and uncertainties inherent
with the application of the POC method of accounting; however, we cannot assure
you that our estimates will be accurate. If our estimates are not accurate or a
contract is terminated, we will be forced to adjust revenue in later periods.
Furthermore, even if our estimates are accurate, we may have a shortfall in our
cash flow and we may need to borrow money to pay taxes until the reported
earnings materialize to actual cash receipts.

SHARE-BASED PAYMENT

Effective January 1, 2006, the Company adopted SFAS No. 123 R, "Share-Based
Payment" for employee options, using the modified prospective transition method.
SFAS 123 R revised SFAS 123 to eliminate the option to use the intrinsic value
method and required the Company to expense the fair value of all employee
stock-based compensation over the vesting period. Under the modified prospective
transition method, the Company recognized compensation cost for the nine months
ended September 30, 2006, which includes (1) period compensation cost related to
share-based payments granted prior to, but not yet vested as of, January 1,
2006, based on the grant date fair value estimated in accordance with the
original provisions of SFAS 123 and (2) compensation cost related to share-based
payments granted within the period, which vested fully upon grant. In accordance
with the modified prospective method, the Company has not restated prior period
results.


                                                                              13

<PAGE>

ITEM2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------

RESULTS OF OPERATIONS

     REVENUE

Revenue for the three months ended September 30, 2006 was $4,412,931 compared to
$6,452,246 for the same period last year, representing a decrease of $2,039,315
or 32%. For the nine months ended September 30, 2006, revenue decreased
$7,110,639, or 37% to $11,900,141, compared to $19,010,780 for the same period
last year. The decrease was due to fewer contract awards and releases in 2006 as
compared to 2005, which resulted from the overall slowdown in the government
contract award process and smaller than anticipated releases on our multiyear
contracts during the 18 month period from February 2005 through August 2006.

We generate revenue primarily from government contracts and to a lesser extent
from one commercial contract. Revenue from government contracts for the nine
months ended September 30, 2006 was $10,682,342 compared to $18,526,114 for the
nine months ended September 30, 2005, a decrease of $7,843,772 or 42%.

During the nine months ended September 30, 2006, we received new contract awards
of $21,270,306. Included in this amount is approximately $6.7 million related to
the C-5 TOP contract. Although the contract is valued at up to $215 million over
the seven-year life of the program, orders under this program, including the
$6.7 million award, have totaled only $13.5 million as of September 30, 2006. As
of September 30, 2006, we had over $290 million in bids outstanding,
representing approximately 25% of the 2005 solicitations and approximately 70%
of the 2006 solicitations. We continue to make bids on contracts on a weekly
basis.

Although we are not actively pursuing commercial contract work, our one
remaining commercial contract accounted for revenue of $1,217,799 for the nine
months ended September 30, 2006 compared to $484,666 for the nine months ended
September 30, 2005.


                                                                              14

<PAGE>

ITEM2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------

     GROSS PROFIT

Gross profit for the three months ended September 30, 2006 was $761,546 compared
to $1,682,990 for the three months ended September 30, 2005, a decrease of
$921,444. As a percentage of revenue, gross profit for the three months ended
September 30, 2006 was 17% compared to gross profit of 26% for the same period
last year. For the nine months ended September 30, 2006, gross profit was
$822,248, or 7% of revenue, compared with $5,247,740, or 28% of revenue for the
first nine months of last year. The decrease in gross profit percentage was due
to overtime and rework costs incurred to correct poor supplier workmanship and
delays in deliveries by some of our suppliers.

Additionally, as previously reported, we had maintained our overhead levels
through June 2006 in anticipation of new awards and releases on contracts we had
already been awarded. Since these awards and releases have not materialized to
increase profitability, at the end of the second quarter, we reduced our staff
by approximately 12%. These staff reductions, along with tighter control over
other overhead costs, reduced factory overhead by approximately $60,000 in the
three month period ended September 30, 2006 as compared to the three month
period ended June 30, 2006.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the three months ended
September 30, 2006 were $774,123 compared to $803,492 for the three months ended
September 30, 2005, a decrease of $29,369, or 4%. This decrease was the result
of tighter control over expenses during the three month period ended September
30, 2006. For the nine months ended September 30, 2006, selling, general and
administrative expenses were $2,756,265 compared to $2,570,393 for the same
period last year, an increase of $185,872, or 7%. This increase was primarily
due to recording non-cash compensation of approximately $252,000 related to
stock options as required pursuant to SFAS 123R as described in Note 2 of the
Condensed Financial Statements, offset by decreases in officers' bonuses of
approximately $44,000 and travel and entertainment of approximately $20,000.

     INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES

Loss before benefit from income taxes for the three months ended September 30,
2006 was $12,577 compared to income before provision for income taxes of
$879,498 for the same period last year For the nine months ended September 30,
2006, loss before benefit from income taxes was $1,934,017 compared to income
before provision for income taxes of $2,677,347 for the same period last year.
The decrease was primarily due to the decrease in gross profit described above.

     PROVISION FOR (BENEFIT FROM) INCOME TAXES

There was a benefit from income taxes of $657,000 for the nine months ended
September 30, 2006, which was the result of a recovery of federal taxes paid in
2005 which are refundable through the filing of a net operating loss carryback
claim. This compares to a provision for income taxes of $331,000 and $1,041,000
for the three and nine months ended September 30, 2005, respectively.


                                                                              15

<PAGE>

ITEM2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------

     NET INCOME (LOSS)

As a result, basic net loss for the three months ended September 30, 2006 was
$12,577, or $0 per basic share, compared to net income of $548,498, or $0.10 per
basic share, for the same period last year. For the nine months ended September
30, 2006, basic net loss was $1,277,017, or $0.23 per basic share, compared with
net income of $1,636,347, or $0.30 per basic share for the same period last
year. Diluted earnings per share for the three months ended September 30, 2005
was $0.09, calculated utilizing 6,115,014 diluted average shares outstanding.
Diluted income per share for the nine months ended September 30, 2005 was $0.27,
calculated utilizing 6,120,977 diluted average shares outstanding. Incremental
shares of 850,678 were not included in the diluted earnings per share
calculation at September 30, 2006 because of the reported net loss, and
accordingly their effect would be anti-dilutive

LIQUIDITY AND CAPITAL RESOURCES

     General

     At September 30, 2006, we had working capital of $25,091,579 compared to
$26,029,916 at December 31, 2005, a decrease of $938,337, or 4%.

     CASH FLOW

     A large portion of our cash is used in paying for materials and processing
costs associated with contracts that are in process and which do not provide for
progress payments. Additionally, contracts that permit us to bill on a progress
basis must be classified as "on time" for us to apply for progress payments. Due
to delays in deliveries from some of our suppliers, we are presently late on two
of our contracts for which progress payments are available. Accordingly, we are
precluded from applying for progress payments on these contracts. During the
year ended December 31, 2005, we incurred approximately $2,358,000 of costs
related to contracts in excess of the amounts that we were permitted to bill on
such contracts. These costs are components of "Costs and estimated earnings in
excess of billings on uncompleted contracts" on our balance sheet and represent
the aggregate costs and related earnings for uncompleted contracts for which the
customer has not yet been billed. These costs and earnings are recovered upon
shipment of products and presentation of billings in accordance with contract
terms.

     Because the POC method of accounting requires us to use estimates in
determining revenues, costs and profits and in assigning the amounts to
accounting periods, there can be a significant disparity between earnings (both
for accounting and taxes) as reported and actual cash received by us during any
reporting period. Accordingly, it is possible that we may have a shortfall in
our cash flow and may need to borrow money until the reported earnings
materialize into actual cash receipts.


                                                                              16

<PAGE>

ITEM2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------

     JP MORGAN CHASE CREDIT FACILITY

In September 2003, we entered into a three year, $5.0 million revolving credit
facility with JP Morgan Chase Bank ("Chase Facility"), secured by our assets.
The facility specified interest rates ranging between the Prime Rate and 225
basis points over LIBOR, depending on certain terms and conditions.

In October 2006, the Chase Facility was amended and restated to provide for a
$1.0 million revolving credit facility, secured by our assets. The facility
specifies an interest rate equal to the greater of (a) the prime rate and (b)
the federal funds rate , plus 0.5%. The facility expires on December 31, 2006.

As of September 30, 2006, we had borrowed $350,000 under the Chase Facility.

We anticipate either extending the line or securing a new line of credit prior
to its expiration. Although we are currently in the process of negotiating an
extension to the line of credit, there is no assurance that an extension, or a
new line of credit, can be secured on terms acceptable to us.

We believe that our existing resources, together with the availability under our
credit facility, will be sufficient to meet our current working capital needs
for at least the next 12 months.

CONTRACTUAL OBLIGATIONS

The table below summarizes information about our contractual obligations as of
September 30, 2006 and the effects these obligations are expected to have on our
liquidity and cash flow in the future years.

<FONT size="1">

                                                        PAYMENTS DUE BY PERIOD ($)
                                      -------------------------------------------------------------
                                                  LESS THAN
CONTRACTUAL OBLIGATIONS                 TOTAL       1 YEAR    1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
- -----------------------------------   ---------   ---------   ---------   ---------   -------------

Short-Term Debt                         350,000     350,000        -0-         -0-            -0-
Long-Term Obligations                    60,042      57,568      2,474         -0-            -0-
Operating Leases                      3,634,267     394,941    825,781     876,071      1,537,474
Employment Agreement Compensation *     657,118     548,830    108,288         -0-            -0-
Total Contractual Cash Obligations    4,701,427   1,351,339    936,543     876,071      1,537,474
</FONT>

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


                                                                              17

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

None

ITEM 4 - CONTROLS AND PROCEDURES

     An evaluation of the effectiveness of our disclosure controls and
procedures was made as of September 30, 2006 under the supervision and with the
participation of our management, including our chief executive officer and chief
financial officer. During the first quarter of 2006, we remediated the material
weakness identified by our independent registered public accounting firm and
discussed in detail in our Annual Report on Form 10-K for the year ended
December 31, 2005. This material weakness related to our internal failure to
detect that (i) costs incurred, revenue recognized and billing to the customer
on certain contracts during the year ended December 31, 2005 were not recognized
properly due to an error made during our conversion from a manual accounting
system to MAPICS, an enterprise-wide electronic processing system, and that (ii)
there had been a misapplication of percentage of completion accounting with
respect to our commercial contract. To remediate the material weakness, our
senior management implemented a new procedure and began monitoring all costs and
control total amounts generated through the MAPICS system and related to
billings and expenses and cross checked such amounts to the general ledger and
the applicable master job cost sheet. Senior management is continually
monitoring the effectiveness of the remedial measures to ensure the
effectiveness of our disclosure controls and procedures for future periods. With
these remedial actions in place, our chief executive officer and chief financial
officer have concluded that our disclosure controls and procedures were
effective as of September 30, 2006 in recording, processing, summarizing and
reporting, on a timely basis, information required to be disclosed by us in
reports that we file or submit under the Securities Exchange Act of 1934.

     During the most recently completed fiscal quarter, except as described
above, there has been no change in our internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.


                                                                              18

<PAGE>

PART II: OTHER INFORMATION

ITEM 1A: RISK FACTORS

There are no material changes from the risk factors set forth in Item 1A, "Risk
Factors," of our Annual Report on Form 10-K for the year ended December 31,
2005. Please refer to that section for disclosures regarding the risks and
uncertainties to our business.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES

          None

ITEM 6 - EXHIBITS

          Exhibit 10.23   Amended and Restated Revolving Credit Agreement
                          between the Company and JPMorgan Chase Bank N.A.
          Exhibit 10.24   Amended and Restated  Revolving Credit Note made by
                          the Company and payable to JPMorgan Chase Bank, N.A.
          Exhibit 10.25   Amended and Restated Security Agreement between the
                          Company and JPMorgan Chase Bank, N.A.
          Exhibit 31.1    Section 302 Certification by Chief Executive Officer
          Exhibit 31.2    Section 302 Certification by Chief Financial Officer
          Exhibit 32      Section 906 Certification by Chief Executive Officer
                          and Chief Financial Officer


                                                                              19

<PAGE>

                                   SIGNATURES

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

                                        CPI AEROSTRUCTURES, INC.


Dated: November 14, 2006                By /S/ Edward J. Fred
                                           -------------------------------------
                                           Edward J. Fred
                                           Chief Executive Officer, President,
                                           and Secretary


Dated: November 14, 2006                By: /S/ Vincent Palazzolo
                                            ------------------------------------
                                            Vincent Palazzolo
                                            Chief Financial Officer


                                                                              20

<PAGE>

                                                                    EXHIBIT 31.1

                      SECTION 302 CERTIFICATION PURSUANT TO
                          RULE 13a-14 AND 15d-14 UNDER
                     THE SECURITIES ACT OF 1934, AS AMENDED

I, Edward J. Fred, certify that:

     1.   I have reviewed this Quarterly Report on Form 10-Q of CPI
          Aerostructures, Inc.;

     2.   Based on my knowledge, this report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this report, fairly present in all material
          respects the financial condition, results of operations and cash flows
          of the issuer as of, and for, the periods presented in this report;

     4.   The issuer's other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the issuer
          and have:

          (a)  Designed such disclosure controls and procedures, or caused such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               issuer, including its consolidated subsidiaries, is made known to
               us by others within those entities, particularly during the
               period in which this report is being prepared;

          (b)  [intentionally omitted];

          (c)  Evaluated the effectiveness of the issuer's disclosure controls
               and procedures and presented in this report our conclusions about
               the effectiveness of the disclosure controls and procedures, as
               of the end of the period covered by this report based on such
               evaluation; and

          (d)  Disclosed in this report any change in the issuer's internal
               control over financial reporting that occurred during the
               issuer's most recent fiscal quarter that has materially affected,
               or is reasonably likely to materially affect, the issuer's
               internal control over financial reporting; and

     5.   The issuer's other certifying officer(s) and I have disclosed, based
          on our most recent evaluation of internal control over financial
          reporting, to the issuer's auditors and to the audit committee of the
          issuer's board of directors (or persons performing the equivalent
          functions):

          (a)  All significant deficiencies and material weaknesses in the
               design or operation of internal control over financial reporting
               which are reasonably likely to adversely affect the issuer's
               ability to record, process, summarize and report financial
               information; and

          (b)  Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the issuer's
               internal control over financial reporting.

Date: November 14, 2006


                                        By: /S/ Edward J. Fred
                                            ------------------------------------
                                            Name: Edward J. Fred
                                            Title: Chief Executive Officer,
                                                   President and Secretary


                                                                              21

<PAGE>

                                                                    EXHIBIT 31.2

                      SECTION 302 CERTIFICATION PURSUANT TO
                          RULE 13a-14 AND 15d-14 UNDER
                     THE SECURITIES ACT OF 1934, AS AMENDED

I, Vincent Palazzolo, certify that:

     1.   I have reviewed this Quarterly Report on Form 10-Q of CPI
          Aerostructures, Inc.;

     2.   Based on my knowledge, this report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this report, fairly present in all material
          respects the financial condition, results of operations and cash flows
          of the issuer as of, and for, the periods presented in this report;

     4.   The issuer's other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the issuer
          and have:

          (a)  Designed such disclosure controls and procedures, or caused such
               disclosure controls and procedures to be designed under our
               supervision, to ensure that material information relating to the
               issuer, including its consolidated subsidiaries, is made known to
               us by others within those entities, particularly during the
               period in which this report is being prepared;

          (b)  [intentionally omitted];

          (c)  Evaluated the effectiveness of the issuer's disclosure controls
               and procedures and presented in this report our conclusions about
               the effectiveness of the disclosure controls and procedures, as
               of the end of the period covered by this report based on such
               evaluation; and

          (d)  Disclosed in this report any change in the issuer's internal
               control over financial reporting that occurred during the
               issuer's most recent fiscal quarter that has materially affected,
               or is reasonably likely to materially affect, the issuer's
               internal control over financial reporting; and

     5.   The issuer's other certifying officer(s) and I have disclosed, based
          on our most recent evaluation of internal control over financial
          reporting, to the issuer's auditors and to the audit committee of the
          issuer's board of directors (or persons performing the equivalent
          functions):

          (a)  All significant deficiencies and material weaknesses in the
               design or operation of internal control over financial reporting
               which are reasonably likely to adversely affect the issuer's
               ability to record, process, summarize and report financial
               information; and

          (b)  Any fraud, whether or not material, that involves management or
               other employees who have a significant role in the issuer's
               internal control over financial reporting.

Date: November 14, 2006


                                        By: /S/ Vincent Palazzolo
                                            ------------------------------------
                                             Name: Vincent Palazzolo
                                             Title: Chief Financial Officer


                                                                              22

<PAGE>

                                                                      EXHIBIT 32

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report of CPI Aerostructures, Inc.
(the "Company") on Form 10-Q for the period ended September 30, 2006 as filed
with the Securities and Exchange Commission (the "Report"), the undersigned, in
the capacities and on the date indicated below, hereby certifies pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.


Dated: November 14, 2006                /S/ Edward J. Fred
                                        ----------------------------------------
                                        Edward J. Fred
                                        Chief Executive Officer, President and
                                        Secretary


Dated: November 14, 2006                /S/ Vincent Palazzolo
                                        ----------------------------------------
                                        Vincent Palazzolo
                                        Chief Financial Officer


                                                                              23

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<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>2
<FILENAME>file2.htm
<DESCRIPTION>AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
<TEXT>
<HTML>
<HEAD>
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<PAGE>

                                                                   Exhibit 10.23

                 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT

                                   DATED AS OF

                                OCTOBER 19, 2006

                                     Between

                            CPI AEROSTRUCTURES, INC.
                                  as Borrower,

                                       and

                           JPMORGAN CHASE BANK, N.A.,
                                     as Bank

<PAGE>

     Reference is made to the Revolving Credit Agreement dated September 12,
2003 between CPI Aerostructures, Inc. ("Borrower") and JPMorgan Chase Bank
("Bank") ("Existing Credit Agreement"). Borrower and Bank agree that to the
extent that this Agreement (as defined below) amends the Existing Credit
Agreement, the Existing Credit Agreement is amended, and to the extent that this
Agreement restates the Existing Credit Agreement, the Existing Credit Agreement
is restated.

     AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of October 19,
2006 between CPI Aerostructures, Inc. ("Borrower") and JPMorgan Chase Bank, N.A.
("Bank").

     The parties to this Agreement hereby agree as follows:

                 ARTICLE I - DEFINITIONS, ACCOUNTING TERMS, ETC.

     Section 1.01. Defined Terms. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have the same
meaning when used in the plural and vice versa):

     "Account" means any right to payment for goods sold or services rendered.

     "Account Debtor" means each Person obligated to make payment on an Account.

     "Affiliate" means any Person which directly or indirectly Controls, or is
Controlled by, or is under common Control with a Credit Party.

     "Affiliate Guarantor" means an Affiliate of Borrower in which Borrower owns
or controls twenty percent (20%) or more of the Equity Interest of such
Affiliate.

     "Alternate Base Rate" means, for any day, a rate per annum equal to the
greatest of (1) the Prime Rate in effect on such day, or (2) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.50%). Any
change in the Alternate Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective from and including the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.

     "Agreement" means this Amended and Restated Revolving Credit Agreement.

     "Applicable Margin" means 1.50% per annum.

     "Bank" means JPMorgan Chase Bank, N.A..

     "Bank's Office" means 395 North Service Road, Suite 302, Melville, New York
11747.

     "Board of Governors" means the Board of Governors of the Federal Reserve
System.


                                        1

<PAGE>

     "Borrower" means CPI Aerostructures, Inc.

     "Borrowing Base" means, at any time, an amount equal to 85% of the face
amount of all Eligible Accounts.

     "Borrowing Base Certificate" means a certificate in substantially the form
of "Borrowing Base Certificate" (Exhibit D).

     "Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed.

     "Capital Lease" means a lease which is or should be capitalized in
accordance with GAAP.

     "Change in Control" means (1) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of Equity
Interests representing more than 25% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of Borrower; (2)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of Borrower by Persons who were neither (a) nominated by the board of
directors of Borrower nor (b) appointed by directors so nominated; or (3) the
acquisition of direct or indirect Control of Borrower by any Person or group.

     "Closing Date" means October 19, 2006.

     "Code" means the Internal Revenue Code of 1986.

     "Collateral" means each asset in which Bank is granted a security interest
pursuant to a Security Document.

     "Consolidation Date" means the day Borrower forms, creates or acquires a
Consolidated Subsidiary.

     "Consolidated Subsidiary" means each Subsidiary of Borrower which, in
accordance with GAAP, should be included in the consolidated financial
statements of Borrower.

     "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

     "Credit Parties" means Borrower and each Guarantor, if any, or any or all
of the foregoing, all as the context may require.


                                        2

<PAGE>

     "Debt" means, with respect to any Person, each of the following (1)
indebtedness or liability for borrowed money, or for the deferred purchase price
of property or services (including trade obligations), (2) all obligations
evidenced by bonds, debentures, notes or other similar instruments, (3)
obligations as lessee under Capital Leases, (4) current and future liabilities
in respect of unfunded vested benefits under any Plan, (5) reimbursement
obligations under letters of credit issued for the account of any Person, (6)
all reimbursement obligations arising under bankers' or trade acceptances, (7)
all guarantees, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase any
of the items included in this definition, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor against
loss, (8) all obligations secured by any Lien on property owned by such Person
even if the obligations secured by such Lien on such property have not been
assumed, (9) all other liabilities recorded, or required to be recorded, in such
Person's financial statements in accordance with GAAP, and (10) all obligations
under any agreement providing for a swap, ceiling rates, ceiling and floor
rates, contingent participation or other hedging mechanisms with respect to
interest payable on any of the items described above in this definition.

     "Default" means any of the events specified in "Events of Default" (Section
8.01), whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.

     "Default Rate" means a variable rate 3.00% above the Prime Rate plus the
Applicable Margin.

     "Dollars" and the sign "$" mean lawful money of the United States of
America.

     "Eligible Account" means an Account owing to Borrower, now existing or
hereinafter arising, which Account met the following specification at the time
it came into existence and continues to meet the same until it is collected in
full:

     (1) A final or progress invoice was issued on such Account, the Account
Debtor is not given more than 90 calendar days from the invoice date of such
Account to pay such Account, such Account does not remain outstanding and unpaid
on or after 90 days from the date of the invoice for such Account, such Account
is payable in the United States in Dollars and the invoice on such Account is
unconditional, does not permit returns except for defective goods, does not
restrict collection rights,

     (2) The Account arose from the outright sale of goods or from the
performance of services in the ordinary course of business, and in the case of
goods, such goods have been shipped to the Account Debtor and no return,
rejection or repossession has occurred, and such goods have been finally
accepted by the Account Debtor without dispute, and in the case of services,
such services have been completed and finally accepted by the Account Debtor
without dispute,

     (3) The Account is a valid and legally enforceable obligation of the
Account Debtor and is not subject to any credit, allowance, defense, offset,
counterclaim or adjustment by the


                                        3

<PAGE>

Account Debtor other than a credit or allowance provided in accordance with the
customary credit and collection practices of Borrower,

     (4) The Account is not subject to any Lien (other than the Lien of Bank)
and Bank has a first priority perfected Lien in such Account,

     (5) The Account is evidenced by such invoices, shipping documents, or other
instruments ordinarily used in the trade and the Account is not evidenced by
chattel paper or an instrument of any kind, unless in the case of a note such
note is duly endorsed to Bank,

     (6) No notice or knowledge of the bankruptcy, insolvency, failure, or
suspension or termination of business of the Account Debtor has been received by
Borrower, nor has the Account been written-off, deemed uncollectible or referred
to a collection agency or an attorney by Borrower,

     (7) The Account conforms to all representations, warranties and other
provisions of each of the Financing Documents,

     (8) The Account Debtor is not an Affiliate of Borrower, nor a creditor of
Borrower nor a supplier of goods or services to Borrower,

     (9) The Account Debtor is not a Governmental Authority other than the
United States of America or any department, agency, bureau or division thereof,

     (10) The Account Debtor is a resident of the United States unless the
obligation of such Account Debtor is secured by a letter of credit in a form and
issued by a financial institution satisfactory to Bank,

     (11) The Accounts are not payable in accordance with a contract where 50%
of the aggregate Dollar amount of invoices billed based on such contract are 90
days past the date of their respective invoice dates,

     (12) The Account Debtor has not attempted to renegotiate the amount of such
Account,

     (13) The Account Debtor is not located in any state in which Borrower is
required to qualify to do business and Borrower is not so qualified and such
state does not permit Borrower to retroactively cure its failure to so qualify,

     (14) The Account is not a credit balance, and

     (15) Bank in its reasonable discretion has not deemed the Account or
Account Debtor unsatisfactory.

     Provided, however, the above definition of Eligible Accounts Receivable may
be modified by Bank in its sole discretion at any time after the occurrence of a
Default or Event of Default and at any other time upon thirty (30) days prior
written notice.


                                        4

<PAGE>

     Provided further, notwithstanding any other term of this Agreement,
including this definition, Accounts due under a Government Contract are not
Eligible Accounts, whether or not there is compliance with the Assignment of
Claims Act of 1940 with respect to such Account.

     "Environmental Discharge" means any discharge or release of any Hazardous
Materials in violation of any applicable Environmental Law.

     "Environmental Law" means any Law relating to pollution or the environment,
including Laws relating to noise or to emissions, discharges, releases or
threatened releases of Hazardous Materials into the workplace, the community or
the environment, or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.

     "Environmental Notice" means any complaint, order, citation, letter,
inquiry, notice or other written communication from any Person (1) affecting or
relating to the failure of a Credit Party to comply or requirements with respect
to future compliance with any Environmental Law in connection with any activity
or operations at any time conducted by such Credit Party, (2) relating to the
occurrence or presence of or exposure to, or possible or threatened or alleged
occurrence or presence of or exposure to Environmental Discharges or Hazardous
Materials at the locations or facilities of a Credit Party, including, without
limitation: (a) the existence of any contamination or possible or threatened
contamination at any such location or facility, (b) remediation of any
Environmental Discharge or Hazardous Materials at any such location or facility
or any part thereof, and (3) any material violation or alleged material
violation of any relevant Environmental Law.

     "Equity Interest" means shares of capital stock, partnership interest,
membership interest, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the
holder thereof to purchase or acquire any such equity interest.

     "ERISA" means the Employee Retirement Income Security Act of 1974.

     "ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.

     "Event of Default" means any of the events specified in "Events of Default"
(Section 8.01), provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.

     "Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if


                                        5

<PAGE>

necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by Bank from three Federal funds brokers of recognized
standing selected by Bank.

     "Field Audit" has the meaning specified in "Rights of Inspection" (Section
5.07).

     "Financing Documents" means this Agreement, the Revolving Credit Note, each
Security Document, each Guaranty, and each other agreement or document executed
pursuant to or in connection with any such agreement, or any or all of the
foregoing, all as the context may require.

     "Fiscal Quarter" means each period from January 1 to March 31, April 1 to
June 30, July 1 to September 30 and October 1 to December 31.

     "Fiscal Year" means each period from January 1 to December 31.

     "GAAP" means generally accepted accounting principles as then in effect in
the United States.

     "Good Faith Contest" means the contest of an item if (1) the item is
diligently contested in good faith by appropriate proceedings timely instituted,
(2) adequate reserves are established with respect to the contested item, (3)
during the period of such contest, the enforcement of any contested item is
effectively stayed, and (4) the failure to pay or comply with the contested item
has not and could not result in a Material Adverse Change.

     "Governmental Approvals" means any authorization, consent, or approval of,
or any license, permit, or certification issued by, or any exemption of,
registration or filing with or report or notice to, any Governmental Authority.

     "Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

     "Government Contract" means any contract entered into between Borrower and
the government of the Unites States of America or any department, agency or
instrumentality thereof.

     "Guarantors" means all Persons that execute and deliver a Guaranty, or any
or all of the foregoing, all as the context may require.

     "Guaranty" means a Guaranty in substantially the form of "Guaranty"
(Exhibit B).

     "Hazardous Materials" means any pollutant, contaminants, toxic or hazardous
wastes or other substances regulated by Environmental Law, as any of those terms
are defined from time to time in or for the purposes of any relevant
Environmental Law, including asbestos fibers and friable asbestos,
polychlorinated biphenyls, and any petroleum or hydrocarbon-based products or
derivatives.


                                        6

<PAGE>

     "Interest Payment Date" means the last Business Day of each month and the
Revolving Credit Facility Termination Date.

     "Law" means any treaty, federal, state or local statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and any judicial or administrative interpretation thereof
by a Governmental Authority or otherwise, including any judicial or
administrative order, consent decree, judgment or agreement with a Governmental
Authority.

     "Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).

     "Material Adverse Change" means either (1) a material adverse change in the
status of the business, assets, liabilities, results of operations, conditions
(financial or otherwise), property or prospects of any Credit Party, or (2) any
event or occurrence of whatever nature which could have a material adverse
effect on the ability of any Credit Party to perform its obligations under the
Financing Documents to which it is a party.

     "Material Contract" means each contract pursuant to which Borrower will
receive total payments of $250,000 or more.

     "Material Contract Schedule" means a schedule in substantially the form of
"Material Contracts Schedule" (Exhibit E).

     "Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA
which covers employees of Borrower or any ERISA Affiliate.

     "Net Income" means, for any period, (1) prior to the Consolidation Date,
the net income (exclusive of extraordinary gains and inclusive of extraordinary
losses) of Borrower for such period, and (2) on and after the Consolidation
Date, the net income (exclusive of extraordinary gains and inclusive of
extraordinary losses) of Borrower and its Consolidated Subsidiaries, on a
consolidated basis, for such period, all as determined in accordance with GAAP.

     "PBGC" means the Pension Benefit Guaranty Corporation.

     "Permitted Liens" means each of the Liens permitted under "Liens" (Section
6.03).

     "Person" means an individual, partnership (including limited liability
partnerships), limited liability company, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.


                                        7

<PAGE>

     "Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by Borrower or any ERISA Affiliate.

     "Prime Rate" means the rate of interest per annum publicly announced from
time to time by JPMorgan Chase Bank as its prime rate in effect at its principal
office in New York City, each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective.

     "Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986.

     "Reportable Event" means any of the events set forth in Section 4043 of
ERISA.

     "Revolving Credit Commitment" means Bank's obligations to make Revolving
Credit Loans to Borrower pursuant to "Revolving Credit" (Section 2.01).

     "Revolving Credit Facility" means the lesser of (1) the Revolving Credit
Facility Maximum Amount or (2) the then current Borrowing Base.

     "Revolving Credit Facility Maximum Amount" means $1,000,000, as such amount
may be reduced in accordance with "Reduction in Revolving Credit Facility"
(Section 2.02).

     "Revolving Credit Facility Termination Date" means December 31, 2006.

     "Revolving Credit Loans" has the meaning specified in "Revolving Credits"
(Section 2.01).

     "Revolving Credit Note" has the meaning specified in "Revolving Credit
Note" (Section 2.09).

     "Security Agreement (Borrower) means the Amended and Restated Security
Agreement dated the Closing Date made by Borrower for the benefit of Bank.

     "Security Agreement (Guarantor)" means a Security Agreement in
substantially the form of "Security Agreement" (Exhibit C).

     "Security Documents" means the Security Agreement (Borrower) and each
Security Agreement (Guarantor), if any, or any or all of the foregoing, all as
the context may require.

     "Solvent" means, when used with respect to any Person, that (1) the fair
value of the property of such Person, on a going concern basis, is greater than
the total amount of liabilities (including, without limitation, contingent
liabilities) of such Person, (2) the present fair salable value of the assets of
such Person, on a going concern basis, is not less than the amount that will be
required to pay the probable liabilities of such Person on its debts as they
become absolute and matured, (3) such Person does not intend to, and does not
believe that it will, incur debts or


                                        8

<PAGE>

liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (4) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is
engaged. Contingent liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.

     "Subsidiary" means, as to any Person, any corporation, partnership, limited
liability company or joint venture whether now existing or hereafter organized
or acquired (1) in the case of a corporation, of which a majority of the
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by such Person and/or one or more
Subsidiaries of such Person or (2) in the case of a partnership, limited
liability company or joint venture, of which a majority of the partnership,
membership or other ownership interests are at the time owned by such Person
and/or one or more Subsidiaries of such Person.

     Section 1.02. Rules of Construction. When used in this Agreement (1) "or"
is not exclusive, (2) a reference to a Law includes any amendment or
modification to such Law, (3) a reference to a Person includes its permitted
successors and permitted assigns, and (4) unless otherwise provided for in this
Agreement, a reference to an agreement, instrument or document shall include
such agreement, instrument or document as the same may be amended, modified or
supplemented from time to time in accordance with its terms and as permitted by
the Financing Documents.

     Section 1.03. Accounting Principles and Terms. Except as otherwise provided
in this Agreement, (1) all computations and determinations as to financial
matters, and all financial statements to be delivered under this Agreement,
shall be made or prepared in accordance with GAAP, and (2) all accounting terms
used in this Agreement shall have the meaning ascribed to such terms by such
principles.

                           ARTICLE II REVOLVING CREDIT

     Section 2.01 Revolving Credit. Subject to the terms and conditions of this
Agreement, Bank agrees to make loans pursuant to this Section ("Revolving Credit
Loans") to Borrower from time to time during the period from the Closing Date to
but not including the Revolving Credit Facility Termination Date, provided that
the aggregate principal amount of all Revolving Credit Loans outstanding at any
time does not exceed the Revolving Credit Facility. Each Revolving Credit Loan
which shall not utilize the Revolving Credit Facility in full shall be in the
minimum amount of $100,000. Within the limits of the Revolving Credit Facility
Borrower may borrow, prepay pursuant to "Optional Prepayments" (Section 2.11),
and reborrow under this Section.


                                        9

<PAGE>

     Section 2.02. Reduction in Revolving Credit Facility. Upon at least 3
Business Days prior written notice to Bank, Borrower has the right to terminate
in whole, or reduce in part, the unused portion of the Revolving Credit
Facility, provided that each partial reduction shall be in an amount of not less
than $500,000. Once the Revolving Credit Facility has been reduced it cannot be
reinstated by Borrower.

     Section 2.03. Commitment Fee. Borrower agrees to pay to Bank a commitment
fee ("Commitment Fee") on the average daily difference between the Revolving
Credit Facility Maximum Amount and the aggregate principal amount of all
outstanding Revolving Credit Loans from and including the Closing Date to but
excluding the Revolving Credit Facility Termination Date at a rate per annum
equal to 0.25%. The Commitment Fee is calculated based on a year of 360 days for
the actual number of days elapsed. The accrued Commitment Fee shall be paid in
arrears at Bank's Office in immediately available funds on the last day of each
calendar quarter.

     Section 2.04. Notice and Manner of Borrowing. Borrower shall give Bank
telephonic notice (immediately confirmed in writing) of each Revolving Credit
Loan by 11:00 a.m. on the day of making such Revolving Credit Loan. Each such
notice must specify (1) the date of the requested Revolving Credit Loan and (2)
the amount of the requested Revolving Credit Loan. Not later than 4:00 p.m. (New
York City time) on the date of each Revolving Credit Loan and upon fulfillment
of the applicable conditions set forth in this Agreement, Bank will make such
Revolving Credit Loan available to Borrower in immediately available funds by
crediting the amount of such Revolving Credit Loan to the account of Borrower
with Bank.

     All notices given under this Section shall be irrevocable and shall be
given not later than 11:00 a.m. (New York City time) on a Business Day which is
not less than the number of Business Days specified above for such notice.

     Section 2.05. Interest. Borrower shall pay interest to Bank on the
outstanding and unpaid principal amount of the Revolving Credit Loans at a rate
per annum equal to the Alternate Base Rate plus the Applicable Margin. Any
change in the interest rate based on the Alternate Base Rate resulting from a
change in the Alternate Base Rate shall be effective as of the opening of
business on the day on which such change in the Alternate Base Rate becomes
effective. Interest on the Revolving Credit Loans shall be calculated on the
basis of a year of 360 days for the actual number of days elapsed. Interest on
the Revolving Credit Loan shall be payable on each Interest Payment Date. Any
principal or interest not paid when due (at maturity, by acceleration, or
otherwise) shall bear interest from the date when due until paid in full,
payable on demand, at the Default Rate. The applicable Alternate Base Rate shall
be determined by Bank, and such determination shall be conclusive absent
manifest error. Notwithstanding the foregoing, during the continuance of an
Event of Default, at the option of Bank, the revolving Credit Loans will bear
interest at the Default Rate.

     Section 2.06. Revolving Credit Note. The Revolving Credit Loans shall be
evidenced by, and repaid with interest in accordance with, a single promissory
note of Borrower in substantially the form of the "Amended and Restated
Revolving Credit Note" (Exhibit A) duly completed. The Revolving Credit Note
shall be (1) in the principal amount of $1,000,000, (2)


                                       10

<PAGE>

dated the Closing Date, and (3) payable to Bank at Bank's Office. The Revolving
Credit Loans will be repaid in full on the Revolving Credit Facility Termination
Date.

     Section 2.07. Method of Payment. Borrower shall make each payment under
this Agreement and under the Revolving Credit Note not later than 11:00 a.m.
(New York City time) on the date when due in Dollars to Bank at Bank's Office in
immediately available funds. Borrower hereby authorizes Bank to charge against
any account of Borrower with Bank each payment under this Agreement and under
the Revolving Credit Note when due. Whenever any payment to be made under this
Agreement or under the Revolving Credit Note is stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of the payment of interest.

     Section 2.08. Optional Prepayments. Borrower may, upon at least one (1)
Business Day prior written notice (effective upon receipt) to Bank, prepay the
Revolving Credit Loans in whole or in part with accrued interest to the date of
such prepayment on the amount prepaid, provided that each partial prepayment
shall be in a principal amount of not less than $100,000. Prepayments of the
Revolving Credit Loans in accordance with the terms of this Section shall be
without premium or penalty.

     Section 2.09. Mandatory Prepayment. If the aggregate principal amount of
all outstanding Revolving Credit Loans exceeds the Borrowing Base then Borrower
will immediately prepay the Revolving Credit Loans in an amount so that the
aggregate principal amount of the outstanding Revolving Credit Loans does not
exceed the Borrowing Base.

     Section 2.10. Use of Proceeds. The proceeds of the Revolving Credit Loans
will be used by Borrower to partially finance its ongoing working capital
requirements, and specifically, to provide liquidity to support the performance
under contracts of Borrower. Borrower will not, directly or indirectly, use any
part of the proceeds of the Revolving Credit Loans for the purpose of purchasing
or carrying any margin stock within the meaning of Regulation U of the Board of
Governors or to extend credit to any Person for the purpose of purchasing or
carrying any such margin stock.

                        ARTICLE III CONDITIONS PRECEDENT

     Section 3.01. Conditions Precedent. The obligation of Bank to enter into
this Agreement and to make the initial Revolving Credit Loan is subject to the
condition precedent that Bank shall have received on or before the Closing Date
each of the following, each in form and substance reasonably satisfactory to
Bank and its counsel:

     (1) Revolving Credit Note. The Revolving Credit Note duly executed and
delivered by Borrower.

     (2) Security Agreement. The Security Agreement duly executed and delivered
by Borrower, together with Uniform Commercial Code searches identifying all
financing statements


                                       11

<PAGE>

on file with respect to Borrower in all applicable jurisdictions indicating that
no Person, other than Bank, has a Lien (other than a Permitted Lien) on any of
the Collateral as to which perfection is obtained by the filing of a financing
statement.

     (3) Evidence of Insurance. Evidence that (a) all insurance required to be
maintained under the Financing Documents is in full force and effect, and (b) to
the extent required under the Financing Documents, Bank has been designated a
loss payee and additional insured under such insurance.

     (4) Certificate. The following statements shall be true and Bank shall have
received a certificate signed by a duly authorized representative of Borrower
(dated the Closing Date) stating that:

     (a) The representations and warranties contained in each of the Financing
     Documents are, if subject to a materiality limitation or qualification,
     correct, and if not subject to such a limitation or qualification,
     materially correct, on and as of the Closing Date, as though made on and as
     of such date, and

     (b) No Default or Event of Default has occurred and is continuing, or would
     result from the transactions contemplated by this Agreement and the other
     Financing Documents.

     (5) Consents and Approvals. Evidence that all consents and approvals
required from any Person, including Governmental Authorities in connection with
the transactions and the financing contemplated by the Financing Documents have
been obtained.

     (6) Form 10-Q. A copy of Borrower's "Form 10-Q" for the fiscal quarter
ended June 30, 2006.

     (7) Borrowing Base Certificate. A Borrowing Base Certificate dated as of
the Closing Date.

     (8) Loan and Credit Agreements. Delivery of copies of all material loan or
credit agreements entered into by Borrower.

     (9) Fee. Payment to Bank of a fee of $2,500.

     (10) Accounts Receivable Aging. Delivery of an accounts receivable aging
for Borrower (dated within 30 days prior to the Closing Date).

     (11) Fees and Expense. Payment of all fees and expenses required to be paid
in accordance with the Financing Document, including the reasonable fees and
expenses of counsel to Bank.

     Section 3.02 Conditions Precedent to All Revolving Credit Loans. The
obligation of Bank to make each Revolving Credit Loan after the Closing Date is
subject to the further conditions precedent that on the date of making such
Revolving Credit Loan:


                                       12

<PAGE>

     (1) Representations and Warranties, No Defaults or Events of Default. The
following statements shall be true:

     (a) The representations and warranties contained in each of the Financing
Documents are, if subject to a materiality limitation or qualification, correct
and if not subject to such a limitation or qualification, materially correct, on
and as of the date of making such Revolving Credit Loan as though made on and as
of such date,

     (b) No Default or Event of Default has occurred and is continuing, or would
result from making such Revolving Credit Loan, and

     (2) Compliance with the Borrowing Base. Delivery of a current Borrowing
Base Certificate indicating that after giving effect to such requested Revolving
Credit Loan that Borrower will be in compliance with the Borrowing Base.

     (3) Additional Documentation. Bank shall have received such other
approvals, opinions or documents as Bank may reasonably request.

     Each request for a Revolving Credit Loan and acceptance by Borrower of the
proceeds of such Revolving Credit Loan constitute a representation and warranty
that the statements contained in subsection (1) of this Section are true and
correct both on the date of such request and, unless Borrower otherwise notifies
Bank prior to the receipt of the proceeds of such Revolving Credit Loan, as of
the date of making such Revolving Credit Loan.

                    ARTICLE IV REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Bank as follows:

     Section 4.01. Formation, Good Standing, Corporate Power and Due
Qualification. Borrower (1) is a corporation duly formed, validly existing, and
in good standing under the laws of the jurisdiction of its formation, (2) has
the corporate power and authority to own its assets and to transact the business
in which it now engages or proposes to engage in, and (3) is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction in
which such qualification is required.

     Section 4.02. Corporate Authority, No Contravention. The execution,
delivery and performance by Borrower of each Financing Document to which it is a
party are within its corporate powers, have been duly authorized by all
necessary corporate action and do not and will not (1) require any consent or
approval of its stockholders which has not been obtained, (2) contravene its
certificate of incorporation or by-laws or other organizational document, (3)
violate any provision of any Law, order, writ, judgment, injunction, decree,
determination, or award presently in effect applicable to it, (4) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which it is a party or
by which it or its properties may be bound or affected, or (5) result in, or
require, the


                                       13

<PAGE>

creation or imposition of any Lien upon or with respect to any of the properties
now owned or hereafter acquired by it.

     Section 4.03. Governmental Authority. No authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by Borrower of any
Financing Document to which it is a party.

     Section 4.04. Legally Enforceable Financing Documents. Each Financing
Document to which Borrower is a party is the legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms, except
to the extent that such enforcement may be limited by (1) applicable bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally, or (2)
general equitable principles, regardless of whether the issue of enforceability
is considered in a proceeding in equity or at law.

     Section 4.05. Financial Statements. The consolidated balance sheet of
Borrower and its Consolidated Subsidiary as of December 31, 2005, and the
related consolidated statement of income and consolidated statement of cash
flows for the Fiscal Year of Borrower then ended, and the accompanying
footnotes, together with the audit report on such financial statements, dated
February 2006 of Goldstein Golub Kessler LLP, its independent certified public
accountants, copies of which have been furnished to Bank, fairly present the
financial condition of Borrower and its Consolidated Subsidiary as of such dates
and the results of the operations of Borrower and its Consolidated Subsidiary
for the periods covered by such statements, all in accordance with GAAP
consistently applied. There are no contingent liabilities of Borrower equal to
or greater than $100,000 in the aggregate or $50,000 in each individual case
which are not reflected in such financial statements.

     Section 4.06. Material Adverse Change. No Material Adverse Change has
occurred since the Closing Date.

     Section 4.07. Information. No information, exhibit or report furnished by
Borrower or any other Person to Bank in connection with the Financing Documents
or any transaction contemplated by any such Document contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading. Borrower has disclosed
to Bank in writing any and all facts known to Borrower which relate to the
business of Borrower which are reasonably likely to result in a Material Adverse
Change.

     Section 4.08. Litigation. There is no action, suit or proceeding pending
or, to the knowledge of Borrower, threatened against or affecting any Credit
Party before any Governmental Authority or arbitrator which could, in any one
case or in the aggregate, result in a Material Adverse Change.

     Section 4.09. Ownership and Liens. Borrower has title to, or valid
leasehold interests in, all of its properties and assets, real and personal,
including the properties and assets and leasehold interests reflected in the
financial statements referred to in "Financial Statements" (Section 4.05) (other
than any properties or assets disposed of in the ordinary course of


                                       14

<PAGE>

business), and none of the properties and assets owned by Borrower and none of
the leasehold interests of Borrower is subject to any Lien, except for Permitted
Liens.

     Section 4.10. Subsidiaries. No Credit Party has any Subsidiaries, except in
the case of Borrower, a Guarantor.

     Section 4.11. Partnerships and Joint Ventures. Borrower is not a partner in
any partnership or a party to a joint venture.

     Section 4.12. Compliance with Laws. No Credit Party is in violation of any
Law or in default with respect to any judgment, writ, injunction or decree where
such violation or default has resulted in, or could result in, a Material
Adverse Change. Each Credit Party possesses and is in compliance in all material
respects with all Governmental Approvals required to conduct its business as now
conducted and as presently proposed to be conducted.

     Section 4.13. Taxes. Each Credit Party has filed all tax returns (foreign,
federal, state, and local) required to be filed and has paid all taxes,
assessments, and governmental charges and levies due pursuant either to such
returns or any assessment received by such Credit Party. The charges, accruals
and reserves on the books of each Credit Party for taxes or other governmental
charges are adequate.

     Section 4.14. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of ERISA applicable to Borrower. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been filed
nor has any Plan been terminated. No circumstances exist which constitute
grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings
to terminate, or appoint a trustee to administrate, a Plan, nor has the PBGC
instituted any such proceedings. Neither Borrower nor any ERISA Affiliate has
completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a
Multiemployer Plan. Borrower and each ERISA Affiliate has met its minimum
funding requirements under ERISA with respect to all of its Plans and there are
no unfunded vested benefits. Neither Borrower nor any ERISA Affiliate has
incurred any liability to the PBGC under ERISA.

     Section 4.15. Environmental Protection. Each Credit Party has obtained all
Governmental Approvals required of such Credit Party under all Environmental
Laws. Each Credit Party is in compliance in all material respects with all such
Governmental Approvals, all Environmental Laws, and all agreements entered into
with any Governmental Authority under or pursuant to or with respect to any such
Governmental Approval or Environmental Law.

     Section 4.16. No Defaults on Outstanding Judgments or Orders. Each Credit
Party has satisfied all judgments against such Credit Party and no Credit Party
is in default with respect to any judgment, writ, injunction, decree, rule, or
regulation of any Governmental Authority or arbitrator.

     Section 4.17. Licenses and Intellectual Property. Each Credit Party
possesses all licenses, franchises, patents, copyrights, trademarks, and trade
names, or rights thereto, to conduct its


                                       15

<PAGE>

business as now conducted and as presently proposed to be conducted, and no
Credit Party is in violation of any valid rights of others with respect to any
of the items noted above.

     Section 4.18. Labor Disputes and Acts of God. Neither the business nor the
properties of any Credit Party are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) which has resulted in, or is reasonable likely to result
in, a Material Adverse Change.

     Section 4.19. Other Agreements. No Credit Party is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any organizational document restriction which has
resulted in, or is reasonably likely to result in, a Material Adverse Change. No
Credit Party is in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party where such default has resulted
in, or is reasonably likely to result in, a Material Adverse Change.

     Section 4.20. Governmental Regulation. Borrower is not subject to any Law
limiting its ability to incur its obligations under any of the Financing
Documents to which it is a party, including the Public Utility Holding Company
Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act, or
the Federal Power Act.

     Section 4.21. Government Contracts. Borrower's right to receive payment of
the Account due to Borrower under each Government Contract is assignable to Bank
pursuant to the Assignment of Claims Act of 1940. Borrower is in compliance with
all Laws applicable to Persons entering into and performing Government
Contracts. Borrower has not received any notice of suspension, debarment, cure
notice, show cause notice or notice of termination for default under or with
respect to any Government Contract to which Borrower is a party. There is no
action, suit or proceeding pending, or to the knowledge of Borrower, threatened,
commenced by the United States government against Borrower seeking suspension,
debarment, or termination for default. There is no other adverse action or
proceeding of the United States government in connection with any Government
Contract to which Borrower is a party.

     Section 4.22. Solvent. Borrower is Solvent.

                         ARTICLE V AFFIRMATIVE COVENANTS

     So long as the Revolving Credit Note remains unpaid or any other amount is
owing by any Credit Party to Bank under any Financing Document, each Credit
Party shall:

     Section 5.01. Maintenance of Existence. Preserve and maintain its corporate
existence and good standing in the jurisdiction of its incorporation, and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required.


                                       16

<PAGE>

     Section 5.02. Maintenance of Records. Keep adequate records and books of
account in which complete entries reflecting all financial transactions will be
made in material conformity with GAAP consistently applied.

     Section 5.03. Maintenance of Properties. Maintain, keep and preserve all of
its properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted.

     Section 5.04. Conduct of Business. Continue to engage in a business of the
same general type as conducted by it on the Closing Date.

     Section 5.05. Maintenance of Insurance. Maintain insurance with financially
sound and reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in the same or a
similar business and similarly situated. At all times have Bank designated as a
loss payee and additional insured, as applicable, on all such policies.

     Section 5.06. Compliance With Laws. Comply with all applicable Laws and
Governmental Approvals, such compliance to include paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property, except in the case of taxes, where such taxes are the subject
of a Good Faith Contest. Without limiting the generality of the foregoing
sentence, comply in all material respects with all applicable Environmental Laws
and pay or cause to be paid all costs and expenses incurred in connection with
such compliance.

     Section 5.07. Right of Inspection. Upon reasonable notice and at any
reasonable time and from time to time, permit Bank or any agent or
representative of Bank (1) to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, such Credit Party,
and (2) to discuss the affairs, finances and accounts of such Credit Party with
any of its officers, directors, and the independent accountants for such Credit
Party.

     Permit Bank or any agent or representative of Bank at any time to conduct a
field audit ("Field Audit") of the accounts receivable, inventory and all other
books and record of each Credit Party.

     Section 5.08. Other Agreements. Perform and comply with each of the
provisions of each and every agreement to which it is a party where the failure
to perform or comply could result in a Material Adverse Change.

     Section 5.09. Reporting Requirements. Furnish to Bank:

     (1) Quarterly Financial Statements. As soon as available and in any event
within sixty (60) days after the end of each first, second and third Fiscal
Quarter of each Fiscal Year, (a) prior to the Consolidation Date, a balance
sheet of Borrower as of the end of such quarter, and statements of income and
statements of cash flow for Borrower for such quarter and for the period
commencing at the end of the previous Fiscal Year and ending with the end of
such


                                       17

<PAGE>

quarter, and (b) on and after the Consolidation Date, a consolidated and
consolidating balance sheet of Borrower and its Consolidated Subsidiaries, as of
the end of such quarter, and consolidated and consolidating statements of income
and consolidated and consolidating statements of cash flow for Borrower and its
Consolidated Subsidiaries for such quarter and for the period commencing at the
end of the previous Fiscal Year and ending with the end of such quarter, in the
case of both (a) and (b) above all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
such previous Fiscal Year, and all prepared in compliance with GAAP consistently
applied, and certified by the chief financial officer of Borrower that they are
complete and correct and that they fairly present the financial condition of
Borrower as of the end of such quarter, and the results of operations for such
quarter and such portion of such Fiscal Year (subject to normal year-end
adjustments).

     (2) Annual Financial Statements. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, (a) prior to the
Consolidation Date, a balance sheet of Borrower as of the end of such Fiscal
Year, and the related statement of income and statement of cash flows for the
Fiscal Year then ended, and (b) on and after the Consolidation Date, a
consolidated and consolidating balance sheet of Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Year, and the related consolidated and
consolidating statement of income and consolidated and consolidating statement
of cash flows for the Fiscal Year then ended, and in the case of both (a) and
(b) above, all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in such prior Fiscal
Year, and all prepared in accordance with GAAP consistently applied, and (a)
prior to the Consolidation Date accompanied by an "unqualified" audit report on
such financial statements acceptable to Bank by Goldstein Golub Kessler LLP or
other independent accountants selected by Borrower and reasonably acceptable to
Bank, and (b) on and after the Consolidation Date, accompanied by an
"unqualified" audit report on such consolidated financial statements acceptable
to Bank by Goldstein Golub Kessler LLP or other independent accountants selected
by Borrower and reasonably acceptable to Bank.

     (3) Monthly Accounts Receivable Aging. As soon as available and in any
event within fifteen (15) days after the end of each calendar month an accounts
receivable aging schedule in form and substance reasonably satisfactory to Bank.

     (4) Monthly Borrowing Base Certificate. As soon as available and in any
event within fifteen (15) days after the end of each calendar month, a Borrowing
Base Certificate as of the end of such month.

     (5) Monthly Material Contracts Schedule. As soon as available and in any
event within fifteen (15) days after the end of each calendar month, a Material
Contracts Schedule as of the end of such month.

     (6) Certificate of Chief Financial Officer. Accompanying the quarterly and
annual financial statements to be delivered under subsections (1) and (2) above,
a certificate of the chief financial officer of Borrower (a) certifying that, to
the best of the knowledge of such chief financial officer, no Default or Event
of Default has occurred and is continuing, or if a Default or Event of Default
has occurred and is continuing, a statement as to the nature of such Default or


                                       18

<PAGE>

Event of Default and the action which is proposed to be taken with respect to
such Default or Event of Default, and (b) calculating (i) compliance with the
financial covenants included in "Financial Covenants" (Article VII) and (ii) the
Pricing Ratio.

     (7) Management Letters. Promptly after their receipt, copies of all
management letters or reports submitted to Borrower by its independent public
accountants in connection with the examination of the financial statements of
Borrower made by such accountants.

     (8) Litigation. Promptly after their commencement, notice of all actions,
suits, and proceedings before any Governmental Authority or arbitrator involving
or affecting any Credit Party, which is reasonably likely to be determined
against such Credit Party, and, if so determined, is reasonably likely to result
in a Material Adverse Change.

     (9) Notice of Defaults and Events of Default. As soon as possible and in
any event within five (5) days after the occurrence of each Default or Event of
Default, a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken with respect to such
Default or Event of Default.

     (10) Reports to Other Creditors. Promptly after their furnishing, copies of
any statement or report furnished to any other Person pursuant to the terms of
any indenture, loan, or credit or similar agreement and not otherwise required
to be furnished pursuant to any other clause of this Section.

     (11) Insurance. Promptly after the occurrence of any casualty, damage or
loss to a Credit Party, whether or not giving rise to a claim under any
insurance policy, in an amount greater than $25,000 notice of such event,
together with copies of any documents relating to such event, including copies
of any such claim, in possession or control of such Credit Party or any agent of
such Credit Party, and immediately after the occurrence thereof, written notice
of any cancellation of any insurance policy required to be maintained by such
Credit Party pursuant to any of the Financing Documents.

     (12) Environmental Notices. Promptly after their receipt, copies of all
Environmental Notices received by a Credit Party.

     (13) Material Adverse Change. As soon as possible and in any event within
three (3) Business Days after the occurrence of any event or circumstance which
has resulted in, or is reasonably likely to result in, a Material Adverse
Change, written notice of such event or circumstance.

     (14) ERISA Reports. Upon the request of Bank, promptly after their filing
or receipt, copies of all reports, including annual reports, and notices which
Borrower files with or receives from the PBGC or the U.S. Department of Labor
under ERISA, and as soon as possible and in any event within three (3) Business
Days after Borrower knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the PBGC or
Borrower or any ERISA Affiliate has instituted or will institute proceedings
under Title IV of ERISA to terminate any Plan, Borrower will deliver to Bank a
certificate of the chief


                                       19

<PAGE>

financial officer of Borrower setting forth details as to such Reportable Event
or Prohibited Transaction or Plan termination and the action Borrower proposes
to take with respect to such Event, Transaction or termination.

     (15) Affiliate Guarantors. At least fifteen (15) days before the formation,
creation or acquisition of an Affiliate Guarantor, provide a written report to
Bank stating the name of such Affiliate Guarantor, the type of legal entity of
such Affiliate Guarantor and the percentage of Equity Interest in such Affiliate
Guarantor to be hold by Borrower.

     (16) General Information. Such other information respecting the status of
the business, assets, liabilities, results of operations, condition (financial
or otherwise), property or prospects of any Credit Party as Bank may reasonably
request from time to time.

     Section 5.10. Compliance with Assignment of Claims Act. Upon the request of
Bank, take all actions required to comply with the Assignment of Claims Act of
1940.

     Section 5.11. Compliance with Borrowing Base. At all times take all actions
required so that the aggregate principal amount of all outstanding Revolving
Credit Loans is equal to or less than then current calculation of the Borrowing
Base.

     Section 5.12. Landlord Waivers. As soon as practical, take all actions
required to obtain landlord waivers for all leased locations where the assets of
Borrower are located, warehousemen's waivers for all warehouse locations where
the assets of Borrower are located and mortgagee waivers for all mortgaged
locations where the assets of Borrower are located and Borrower is the
mortgagor.

                          ARTICLE VI NEGATIVE COVENANTS

     So long as the Revolving Credit Note remains unpaid or any other amount is
owing by any Credit Party to Bank under any Financing Document, no Credit Party
shall:

     Section 6.01. Debt. Create, incur, assume, or suffer to exist, any Debt,
except (1) Debt under the Financing Documents or any other Debt owed to Bank,
(2) accrued expenses, trade payables, advances or progress payments under
contracts, all as are customarily incurred in the ordinary course of business,
and (3) Debt secured by purchase money Liens permitted by "Liens" (Section
6.03).

     Section 6.02 Guarantees. Assume, guarantee, endorse or otherwise be or
become directly or contingently responsible or liable for the obligations of any
Person, including but not limited to, an agreement to purchase any obligation,
stock, assets, goods or services or to supply or advance any funds, assets,
goods or services, or an agreement to maintain or cause such Person to maintain
a minimum working capital or net worth or otherwise to assure the creditors of
any Person against loss, except (1) guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business, and
(2) guaranties of the obligations of Affiliate Guarantors.


                                       20

<PAGE>

     Section 6.03 Liens. Create, incur, assume, or suffer to exist, any Lien,
upon or with respect to any of its properties or assets, now owned or hereafter
acquired, except

     (1) Liens in favor of Bank,

     (2) Liens for taxes or assessments or other governmental changes or levies
if not yet due and payable or if they are due and payable they are the subject
of a Good Faith Contest,

     (3) Liens imposed by Law, such as mechanic's, materialmen's, landlord's,
warehousemen's, and carrier's Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
or which are being contested pursuant to a Good Faith Contest,

     (4) Liens under worker's compensation, unemployment insurance, social
security, or similar legislation,

     (5) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), public or statutory obligations, surety,
stay, appeal, indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business,

     (6) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured by such Liens are the subject of a
Good Faith Contest,

     (7) Easements, rights-of-way, restrictions, and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation, use,
and enjoyment by such Credit Party of the property or assets so encumbered in
the ordinary course of its business or materially impair the value of the
property subject to such encumbrance,

     (8) Purchase money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease, provided that:

     (a) Any property subject to any of the foregoing is acquired by the
applicable Credit Party in the ordinary course of its business and the Lien on
any such property is created contemporaneously with such acquisition,

     (b) The Debt secured by any Lien so created, assumed, or existing shall not
exceed 100% of the lesser of cost or fair market value of such property as of
the time of acquisition of such property,

     (c) Each such Lien shall attach only to the property so acquired and fixed
improvements on such property,


                                       21

<PAGE>

     (d) The aggregate Debt outstanding at any time secured by all such Liens
with respect to all Credit Parties shall not exceed $250,000.

     Section 6.04. Lease Obligations. Create, incur, assume, or suffer to exist
any obligation as lessee for the rental or hire of any real or personal
property, except (1) Capital Leases permitted by "Liens" (Section 6.03), and (2)
leases (other than Capital Leases) which do not in the aggregate require all
Credit Parties to make payments (including taxes, insurance, maintenance, and
similar expenses which each Credit Party is required, in the aggregate, to pay
under the terms of any lease) in any Fiscal Year in excess of $500,000.

     Section 6.05 Investments. Make any loan or advance to any Person, or
purchase or otherwise acquire any capital stock, assets, obligations, or other
securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person, except (1) direct obligations of the United
States of America or any agency thereof backed by the full faith and credit of
the United States of America with maturities of one (1) year or less from the
date of acquisition, (2) commercial paper with maturities of one hundred eighty
(180) days or less of a domestic issuer rated at least "A-1" by Standard &
Poor's Rating Group, a division of McGraw-Hill Companies or "P-1" by Moody's
Investors Service, Inc., (3) certificates of deposit with maturities of one (1)
year or less from the date of acquisition issued by any commercial bank having
capital and surplus in excess of $1,000,000,000 and (4) loans or advances made
to directors, officers and employees of Borrower provided that the aggregate
principal amount of all such loans or advances outstanding at any time is equal
to or less than $250,000.

     Section 6.06 Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of, any of its now owned or hereafter acquired assets, except (1)
inventory disposed of in the ordinary course of business, and (2) the sale or
other disposition of assets no longer used or useful in the conduct of its
business.

     Section 6.07. Distributions. Declare or pay any dividends or distributions
(other than dividends payable solely in capital stock) or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock or securities
convertible into capital stock now or hereafter outstanding, or make any
distribution of assets to stockholders as such, whether in cash, assets, or in
obligations of Borrower, or allocate or otherwise set apart any sum for the
payment of any dividend or distribution on, or for the purchase, redemption, or
retirement of any capital stock, or make any other distribution by reduction of
capital or otherwise in respect of any capital stock, or purchase or otherwise
acquire for value any capital stock.

     Section 6.08 Fundamental Changes. Merge or consolidate with, or change its
form of business organization, or liquidate or dissolve (or suffer any
liquidation or dissolution), or sell, assign, lease, or otherwise dispose of
(whether in one transaction or in a series of transactions) all or a material
portion of its assets (whether now owned or hereafter acquired), to any Person,
or acquire all or substantially all of the assets or the business of any Person,
or acquire from any Person assets which will constitute a material portion of
the assets of the applicable Credit Party after giving effect to such
acquisition, or enter into a joint venture with any Person or become a partner
in any partnership.


                                       22

<PAGE>

     Section 6.09. Lines of Business. Directly or indirectly engage in any
business inconsistent with the general character of the business in which it is
engaged on the Closing Date, or substantially alter the general character of its
business.

     Section 6.10. Transaction With Affiliate. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of the business of the applicable
Credit Party and upon fair and reasonable terms no less favorable to such Credit
Party that such Credit Party would obtain in a comparable arm's length
transaction with a Person not an Affiliate.

     Section 6.11. Name, Fiscal Year Accounting and Organizational Documents.
Change its name, its Fiscal Year, its method of accounting, except as required
by GAAP, or any of the terms or provisions of its certificate incorporation or
by-laws or any other organizational document.

     Section 6.12. Prepayment of Debt. Prepay any Debt, other than Debt owed to
Bank.

                         ARTICLE VII FINANCIAL COVENANT

     So long as the Revolving Credit Note remains unpaid or any other amount is
owing by any Credit Party to Bank under any Financing Document:

     Section 7.01. Minimum Net Income. Credit Parties will have for each Fiscal
Quarter Net Income of not less than $1.00.

                   ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

     Section 8.01 Events of Default. Any of the following events shall be an
"Event of Default":

     (1) Payment Default. Borrower fails (a) to pay the principal of, or
interest on, the Revolving Credit Note when due and payable, or (b) failure to
make a mandatory prepayment under "Mandatory Prepayment" (Section 2.12) when
required, or (c) Borrower fails to pay any fees or expenses required to be paid
under any of the Financing Documents within five (5) Business Days of when due
and payable,

     (2) Breach of Representation. Any representation or warranty made by a
Credit Party in any Financing Document to which it is a party or which is
contained in any certificate, document, opinion, or financial or other statement
furnished at any time under or in connection with any Financing Document shall
prove to have been (a) in the case of such representation or warranty which is
not subject to a materiality limitation or qualification, incorrect in any
material respect on or as of the date made, or (b) in the case of such
representation or warranty which is subject to a materiality limitation or
qualification, incorrect on or as of the date made,


                                       23

<PAGE>

     (3) Breach of Covenant. Borrower fails to perform or observe any term,
covenant or agreement contained in "Maintenance of Insurance" (Section 5.05),
"Reporting Requirements" (Section 5.09), "Negative Covenants" (Article VI) or
"Financial Covenant" (Article VII) on its part to the performed or observed, or
Borrower fails to perform or observe any other term, covenant or agreement
contained in this Agreement and such failure shall remain unremedied for fifteen
(15) consecutive calendar days after such occurrence,

     (4) Cross Default. Any Credit Party shall (a) fail to pay all or any
portion of its Debt (other than the Debt evidenced by the Revolving Credit Note)
or any interest or premium on such Debt when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt, or any other default under any agreement or
instrument relating to any such Debt, or any other event shall occur and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt, or any such Debt shall be
declared to be due and payable, or be required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity of such
Debt,

     (5) Bankruptcy. Any Credit Party shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against any Credit Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangements, adjustment, protection, relief, or composition of
it or its debts under any Law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property and if instituted against a Credit
Party shall remain undismised for a period of 60 days, or any Credit Party shall
take any action to authorize any of the actions set forth above in this
subsection (5),

     (6) Judgments. Any judgment or order or combination of judgments or orders
for the payment of money, in excess of $25,000 in the aggregate, shall be
rendered against any Credit Party and either (a) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order or (b) there
shall be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect,

     (7) ERISA. Any of the following events occur or exist with respect to
Borrower or any ERISA Affiliate: (a) any Prohibited Transaction involving any
Plan; (b) any Reportable Event with respect to any Plan; (c) the filing under
Section 4041 of ERISA of a notice of intent to terminate any Plan or the
termination of any Plan; (d) any event or circumstance that might constitute
grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA
for the termination of, or for the appointment of a trustee to administer, any
Plan, or the institution of the PBGC of any such proceedings; (e) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan
or the reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other events or
conditions, if any, could in the reasonable opinion of Bank subject any Credit
Party or


                                       24

<PAGE>

any ERISA Affiliate to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in
the aggregate exceeds or may exceed $25,000,

     (8) Financing Documents. Any Financing Document shall at any time after its
execution and delivery and for any reason, ceases to be in full force and effect
or shall be declared to be null and void, or the validity or enforceability of
such Financing Document shall be contested by any Credit Party or any Credit
Party shall fail to perform any of its obligations under such Financing Document
or any Credit Party shall deny that it has any or further liability or
obligation under any such Financing Document,

     (9) Security Documents. Any Security Document shall at any time and for any
reason cease (a) to create a valid Lien in and to the property purported to be
subject to such Security Document, or (b) if the Lien on the property purported
to be subject to such Security Document ceases for any reason to be a perfected
first priority Lien in any or all of such property,

     (10) Change of Control. The occurrence of a Change of Control,

     (11) Change of Management. If for any reason Edward J. Fred is no longer
actively engaged on a full time basis in the management and operation of the
business of Borrower,

     (12) Affiliates. If for any reason any Affiliate Guarantor formed, created
or acquired after the Closing Date fails to execute and deliver both a Guaranty
and a Security Agreement (Guarantor) simultaneously with such formation,
creation or acquisition; or

     (14) Material Adverse Change. The occurrence of a Material Adverse Change.

     Section 8.02 Remedies. If any Event of Default shall occur, Bank may, (1)
by notice to Borrower, terminate the Revolving Credit Commitment, (2) by notice
to Borrower, declare the outstanding Revolving Credit Loans Note, all interest
on the Revolving Credit Note, and all other amounts payable under any other
Financing Document to be forthwith due and payable, whereupon the Revolving
Credit Note, all such interest, and all such amounts due under such other
Financing Documents shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by Borrower, (3) exercise any remedies provided in any
of the Financing Documents and/or (4) exercise any rights and remedies provided
by Law, provided, however, that upon the occurrence of an Event of Default
specified under (5) above, the outstanding Revolving Credit Note and any other
amounts payable under all the Financing Documents, and all interest on any of
the foregoing, shall be forthwith due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrower.

     No failure on the part of Bank to exercise, and no delay in exercising, any
right under any Financing Document shall operate as a waiver of such right or
preclude any other or further exercise of such right or the exercises of any
other right. The remedies provided in the Financing Documents are cumulative and
not exclusive of any remedies provided by Law.


                                       25

<PAGE>

                            ARTICLE IX MISCELLANEOUS

     Section 9.01 Amendments, Etc. No amendment, modification, termination, or
waiver of any provision of any Financing Document, nor consent to any departure
by any Credit Party from any Financing Document, shall in any event be effective
unless the same shall be in writing and signed by Bank, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

     Section 9.02 Usury. Anything herein to the contrary notwithstanding, the
obligations of Borrower under this Agreement and the Revolving Credit Note shall
be subject to the limitation that payments of interest shall not be required to
the extent that receipt of such payment would be contrary to provisions of Law
applicable to Bank limiting rates of interest which may be charged or collected
by Bank.

     Section 9.03 Costs and Expenses. Borrower agrees to pay on demand all costs
and expenses in connection with the preparation, execution, delivery, filing,
recording, and administration of any of the Financing Documents, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for Bank, with respect to the items noted above and with respect to advising
Bank as to its rights and responsibilities under any of the Financing Documents,
and all costs and expenses, if any, in connection with the enforcement of any of
the Financing Documents. In addition, Borrower agrees to pay for one Field Audit
in each calendar year and all Field Audits conducted after the occurrence of an
Event of Default but in no event will Borrower be required to pay for more than
two Field Audits in any calendar year. In addition, Borrower agrees to pay any
and all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing, and recording of any of the
Financing Documents and the other documents to be delivered under any such
Financing Documents, and agrees to save Bank harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees. All such costs and expenses not paid when
requested by Bank will accrue interest at a rate per annum equal to the
Alternate Base Rate plus 4.50%.

     Section 9.04 Indemnification. Borrower agrees to indemnify Bank and its
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or expenses incurred
by any of them arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings) relating to any actual or proposed use by Borrower of the proceeds
of the Revolving Credit Loans, including without limitation, the reasonable fees
and disbursements of counsel incurred in connection with any such investigation
or litigation or other proceedings, but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified.

     The obligations of Borrower under this Section shall survive the repayment
of the Revolving Credit Loans and all amounts due under or in connection with
any of the Financing Documents.


                                       26

<PAGE>

     Section 9.05 Assignment, Participation. This Agreement shall be binding
upon, and shall inure to the benefit of Borrower, Bank and their respective
successors and assigns. Borrower may not assign or transfer its rights or
obligations under any of the Financing Documents. In the case of an assignment
by Bank, the assignee shall have, to the extent of such assignment (unless
otherwise provided in such assignment), the same rights, benefits and
obligations as it would have if it were Bank.

     Bank may sell participation in all or any part of the Revolving Credit
Loans to one or more banks or other institutions. Each such participant shall
have no rights under the Financing Documents and all amounts payable by Borrower
shall be determined as if Bank had not sold such participation. Bank may furnish
any information concerning Borrower in the possession of Bank from time to time
to assignees and participants (including prospective assignees and
participants).

     Bank will notify Borrower of an assignment under this Section. Bank has the
right to pledge the Revolving Credit Note to a Federal Reserve Bank.

     Section 9.06 Notices, Etc. All notices and other communications provided
for under any of the Financing Documents shall be in writing and shall be
delivered by hand or overnight courier service, registered mailed or sent by
telecopy to any party to this Agreement, at its address specified on its
signature page to this Agreement or, as to each party, at such other address as
shall be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices and
communications shall be effective in the case of delivery by hand or overnight
courier service or by telecopy on the date of receipt and be effective in the
case of delivery by mail five (5) Business Days after being deposited in the
mails.

     Section 9.07 Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, Bank is hereby authorized at any time and
from time to time, without notice to Borrower (any such notice being expressly
waived by Borrower), to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit or the account of
Borrower against any and all of the obligations of Borrower now or hereafter
existing under any of the Financing Documents, irrespective of whether or not
Bank shall have made any demand under such Financing Document and although such
obligations may be unmatured. Bank agrees promptly to notify Borrower, after any
such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application. The rights of Bank under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Bank may have.

     Section 9.08 Jurisdiction, Immunities. Each Credit Party hereby irrevocably
submits to the jurisdiction of any New York State or United States Federal court
sitting in County of Nassau in the State of New York over any action or
proceeding arising out of or relating to any of the Financing Documents, and
each Credit Party hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State or
Federal court. Each Credit Party irrevocably consents to the service of any and
all process in any such


                                       27

<PAGE>

action or proceeding by the mailing of copies of such process to such Credit
Party at its address specified on the signature page of this Agreement by
registered mail, return receipt requested. Each Credit Party agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in any other jurisdictions by suit on the judgment or in any other
manner provided by Law. Each Credit Party further waives any objection to venue
in such State on the basis of inconvenient forum. Each Credit Party further
agrees that any action or proceeding brought against Bank shall be brought only
in New York State or United States Federal court sitting in the County of
Nassau.

     Nothing in this Section shall affect the right of Bank to serve legal
process in any other manner permitted by Law or affect the right of Bank to
bring any action or proceeding against any Credit Party or its property in the
courts of any other jurisdictions.

     To the extent that any Credit Party has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, such
Credit Party hereby irrevocably waives such immunity in respect of its
obligations under all of the Financing Documents.

     Section 9.09 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to its conflict of law principles.

     Section 9.10 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement.

     Section 9.11 Table of Contents, Headings. The headings in the Table of
Contents and in this Agreement are for reference only, and shall not affect the
interpretation or construction of this Agreement.

     Section 9.12 Severability of Provisions. Any provision of any Financing
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Financing
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.

     Section 9.13 Integration. The Financing Documents set forth the entire
agreement among the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.

     Section 9.12 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES ITS RIGHT TO A
JURY TRIAL.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       28

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the year and date first above written.

                                        CPI Aerostructures, Inc.


                                        By: /S/ Edward J. Fred
                                            ------------------------------------
                                        Name: Edward J. Fred
                                        Title: Chief Executive Officer,
                                               President and Secretary

                                        Address for Notices:

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


                                        JPMorgan Chase Bank, N.A.


                                        By: /S/ Lisa A. Gomez
                                            ------------------------------------
                                        Name: Lisa A. Gomez
                                        Title: Vice President

                                        Address for Notices:

                                        JPMorgan Chase Bank, N.A.
                                        395 North Service Road
                                        Suite 302
                                        Melville, New  York  11747


                                       29




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<SEQUENCE>3
<FILENAME>file3.htm
<DESCRIPTION>AMENDED AND RESTATED REVOLVING CREDIT NOTE
<TEXT>
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<TITLE>
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<PAGE>

                                                                   Exhibit 10.24

                                    EXHIBIT A
                   AMENDED AND RESTATED REVOLVING CREDIT NOTE

$1,000,000                                                    Melville, New York
                                                                October 19, 2006

     Reference is made to the $5,000,000 Revolving Credit Note dated September
12, 2003 made by CPI Aerostructures, Inc. and payable to JPMorgan Chase Bank
("Existing Note"). Borrower (as defined below) and Bank (as defined below) each
agree that to the extent that this Amended and Restated Revolving Credit Note
amends the Existing Note, the Existing Note is amended, and to the extent that
this Amended and Restated Revolving Credit Note restates the Existing Note, the
Existing Note is restated.

     FOR VALUE RECEIVED, CPI Aerostructures, Inc. ("Borrower") hereby promises
to pay to the order of JPMorgan Chase Bank, N.A. ("Bank") at the office of Bank
located at 395 North Service Road, Suite 302, Melville, New York 11747 or at
such other location as Bank may direct, the principal sum of $1,000,000, or if
less, the aggregate unpaid principal amount of all Revolving Credit Loans made
by Bank to Borrower pursuant to the Credit Agreement referred to below on the
Revolving Credit Facility Termination Date (as defined in the Credit Agreement
referred to below).

     Borrower also promises to pay interest on the unpaid principal balance of
this Amended and Restated Revolving Credit Note, for the period any principal is
outstanding under such Note, at the office specified above, at the time and rate
per annum specified in the Credit Agreement referred to below. Any amount of
principal or interest due and payable pursuant to this Amended and Restated
Revolving Credit Note which is not paid when due, whether by stated maturity,
acceleration or otherwise, shall bear interest from the date when due until said
principal amount or interest is paid in full, payable on demand, at a rate per
annum equal at all times to the Default Rate.

     Borrower hereby authorizes Bank to endorse on the Schedule annexed to this
Amended and Restated Revolving Credit Note the amount of all Revolving Credit
Loans made to Borrower by Bank and all continuations, conversions and payments
of principal amounts in respect of the Revolving Credit Loans, which
endorsements shall, in the absence of manifest error, be conclusive as to the
outstanding principal amount of all Revolving Credit Loans owed to Bank,
provided, however, that the failure to make such notation with respect to any
Revolving Credit Loan or payment shall not limit or otherwise affect the
obligation of Borrower under the Credit Agreement or this Amended and Restated
Revolving Credit Note.

     If this Amended and Restated Revolving Credit Note becomes due and payable
on a day other than a Business Day, the maturity of this Note shall be extended
to the next


                                       1

<PAGE>

following Business Day, and interest shall be payable on such installment at the
rate specified in this Amended and Restated Revolving Credit Note during such
extension.

     All payments on this Amended and Restated Revolving Credit Note shall be
made in lawful money of the United States of America in immediately available
funds.

     Reference is made to the Amended and Restated Revolving Credit Agreement
dated October 19, 2006 between Borrower and Bank (the Revolving Credit
Agreement, as it be amended from time to time, being the "Credit Agreement").
This Amended and Restated Revolving Credit Note is the Revolving Credit Note
referenced in the Credit Agreement and evidences the Revolving Credit Loans made
by Bank to Borrower pursuant to the Credit Agreement. All capitalized terms used
in this Amended and Restated Revolving Credit Note which are not defined in this
Amended and Restated Revolving Credit Note shall have the meaning specified for
such term in the Credit Agreement.

     The Credit Agreement provides for the acceleration of the maturity of the
Revolving Credit upon the occurrence of an Event of Default and for prepayments
on the terms and conditions set forth in such Credit Agreement.

     Borrower hereby waives presentment, notice of dishonor, protest and any
other notice or formality with respect to this Amended and Restated Revolving
Credit Note.

     This Amended and Restated Revolving Credit Note shall be governed by, and
interpreted and construed in accordance with, the laws of the state of New York,
without regard to its conflicts of law provisions.

                                        CPI Aerostructures, Inc.


                                        By: /S/ Edward J. Fred
                                            ------------------------------------
                                        Name: Edward J. Fred
                                        Title: President and CEO


                                       2

<PAGE>

            SCHEDULE TO AMENDED AND RESTATED REVOLVING CREDIT NOTE OF
                            CPI AEROSTRUCTURES, INC.

                                                Unpaid     Name of
Date Loan                         Amount of   Principal     Person
 Made or    Type of   Amount of   Principal   Balance of    Making
 Repaid       Loan       Loan     Repayment     Loans      Notation
- ---------   -------   ---------   ---------   ----------   --------


                                       3



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<SEQUENCE>4
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<DESCRIPTION>AMENDED AND RESTATED SECURITY AGREEMENT
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<PAGE>

                                                                   Exhibit 10.25

                     AMENDED AND RESTATED SECURITY AGREEMENT
                             (All Personal Property)

     Reference is made to the Security Agreement dated September 12, 2003
between CPI Aerostructures, Inc. and JPMorgan Chase Bank ("Existing Security
Agreement"). CPI Aerostructures, Inc. and JPMorgan Chase Bank, N.A. agree that
to the extent this Amended and Restated Security Agreement amends the Existing
Security Agreement, the Existing Security Agreement is amended, and to the
extent this Amended and Restated Security Agreement restates the Existing
Security Agreement, the Existing Security Agreement is restated.

     Amended and Restated Security Agreement dated as of October 19, 2006
("Security Agreement") made by CPI Aerostructures, Inc. ("Borrower") to JPMorgan
Chase Bank, N.A. ("Bank").

     In consideration of Bank providing credit to Borrower, Borrower hereby
agrees as follows:

     Section 1. Definitions. As used in this Security Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):

     "Borrower" means CPI Aerostructures, Inc.

     "Collateral" has the meaning specified in "Grant of Security Interest"
(Section 3).

     "Contracts" means each contract, agreement, instrument and indenture to
which Borrower is a party or under which Borrower has any right, title and
interest or to which Borrower or its property is subject.

     "Perfection Certificate" means the Perfection Certificate attached to and
made a part of this Security Agreement, as amended from time to time.

     "Revolving Credit Agreement" means the Amended and Restated Revolving
Credit Agreement dated as of October 19, 2006 between CPI Aerostructures, Inc.
and JPMorgan Chase Bank, N.A.

     "Secured Obligations" means any and all present and future liabilities and
obligations of Borrower to Bank, including those under or in connection with the
Revolving Credit Agreement, whether incurred by Borrower as principal or
guarantor or otherwise, and whether due or to become due, secured or unsecured,
absolute or contingent, joint or several, direct or indirect (including
participations or any interest of Bank in obligations of Borrower to others),
acquired outright, conditionally or as


                                        1

<PAGE>

collateral security by Bank from another, liquidated or unliquidated, arising by
operation of law or otherwise, together with all fees and expenses incurred in
collecting any or all of the items specified in this definition or enforcing any
rights under any of the documents executed in connection with any such
liabilities and obligations, including all fees and expenses of Bank's counsel
and of any experts and agents which may be paid or incurred by Bank in
collecting any such items or enforcing any such rights.

     "Security Agreement" means this Security Agreement.

     "UCC" means the Uniform Commercial Code of New York as in effect from time
to time.

     Unless otherwise defined in this Security Agreement, (1) all terms defined
in the Revolving Credit Agreement will have the same meaning specified for such
term in the Revolving Credit Agreement when used in this Security Agreement, and
(2) all terms defined in the UCC that are used in this Security Agreement shall
have the meaning specified in the UCC when used in this Security Agreement.

     Section 2. Rules of Interpretation. When used in this Security Agreement:
(1) "or" is not exclusive, (2) a reference to a law includes any amendment or
modification to such law, and (3) a reference to an agreement, instrument or
document includes any amendment of modification of such agreement, instrument or
document.

     Section 3. Grant of Security Interest. Borrower hereby grants to Bank a
continuing security interest in and lien on all right, title and interest of
Borrower in and to each of the following items, whether now owned or hereafter
acquired, created or existing: (1) all Accounts, (2) all Chattel Paper (whether
tangible or electronic), (3) each Commercial Tort Claim listed on the Perfection
Certificate, (3) all Deposit Accounts, (4) all Documents, (5) all General
Intangibles (including Payment Intangibles and Software), (6) all Goods
(including Inventory, Equipment, Fixtures and Accessions), (7) all Instruments
(including promissory notes), (8) all Investment Property, (9) all
Letter-of-Credit Rights, (10) all Letters of Credit, (11) all Money, (12) all
Supporting Obligations, (13) all Intellectual Property, and (14) all Proceeds
and products of the foregoing ("Collateral").

     Section 4. Security for Secured Obligations. The Collateral secures the
prompt and complete payment when due of all Secured Obligations.

     Section 5. Filing of Financing Statement. Borrower hereby authorizes Bank,
its counsel or its representative, at any time and from time to time, to file
financing statements and amendments covering the Collateral in such
jurisdictions as Bank may deem necessary or desirable to perfect the security
interests granted by Borrower under this Security Agreement. Such financing
statements may describe the collateral covered by such financing statements as
"all personal property of Borrower" or words of similar effect.


                                        2

<PAGE>

     Section 6. Actions to Perfect Security Interest. Borrower agrees that from
time to time, it will promptly execute and deliver all instruments and
documents, and take all actions, that may be necessary or desirable, or that
Bank may request, for the attachment, perfection and maintenance of the priority
of, the security interest of Bank in any and all of the Collateral or to enable
Bank to exercise and enforce any and all of its rights, powers and remedies
under this Security Agreement with respect to any and all of the Collateral. In
addition, upon the request of Bank, Borrower agrees that in the case of Accounts
where the obligor on such Account is the United States of America or any of its
departments, agencies or instrumentalities, Borrower will take all actions
required to comply with the Assignment of Claims Act of 1940.

     Section 7. Continued Perfection of Security Interest. Borrower shall
immediately notify Bank if any information set forth in the Perfection
Certificate is misleading in any way or is no longer true, correct and complete.
In addition, Borrower shall immediately deliver to Bank a revised Perfection
Certificate that is true, correct, complete and not misleading in any way. Upon
the delivery of such revised Perfection Certificate such revised Perfection
Certificate will be the applicable Perfection Certificate under this Security
Agreement.

     Unless Borrower has provided Bank with thirty (30) days prior written
notice of its intention to do any of the following and prior to taking such
proposed action Borrower has executed and delivered all such additional document
and performed all additional acts as Bank may require, in its sole discretion,
to continue or maintain the existence and priority of the security interest of
Bank in the Collateral, Borrower shall not: (1) change its name, identity or
structure, (2) merge or consolidate into, or transfer any Collateral to any
other party, (3) change the location of its chief executive office or principal
place of business, (4) change the jurisdiction of its organization, (5) relocate
or maintain any Collateral at any location not specified on the Perfection
Certificate, or (6) change the location where the books and records related to
the Collateral are maintained. The provisions of this paragraph are not a
limitation on, or exception to, prohibitions and restrictions set forth in the
Revolving Credit Agreement.

     Section 8. Waivers and Consents. Borrower agrees to (1) obtain all
governmental and other third party waivers, consents and approvals, in form and
substance reasonably satisfactory to Bank, required for the execution and
performance of this Security Agreement by Bank, including, the consent of each
licensor, lessor or other persons obligated on Collateral and (2) to the extent
requested by Bank, obtain waivers and subordinations, in form and substance
satisfactory to Bank, from mortgagees and landlords where any of the Collateral
is located.

     Section 9. Representations and Warranties. At the time of execution of this
Security Agreement and each time Bank provides credit as noted above, Borrower
represents and warrants to Bank as follows:

     (1) Incorporation, Good Standing, Corporate Power and Due Qualification.
Borrower (a) is a corporation duly incorporated, validly existing, and in good
standing


                                        3

<PAGE>

under the laws of the jurisdiction of its incorporation, (b) has the corporate
power and authority to own its assets and to transact the business in which it
now engages or proposes to engage in, and (c) is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required.

     (2) Corporate Authority, No Contravention. The execution, delivery and
performance by Borrower of this Security Agreement are within its corporate
powers, have been duly authorized by all necessary corporate action and do not
and will not (a) require any consent or approval of its stockholders which has
not been obtained, (b) contravene its charter or bylaws, (c) violate any
provision of any law, order, writ, judgment, injunction, decree, determination,
or award presently in effect applicable to it, (d) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which it is a party or by which it or
its properties may be bound or affected, or (e) result in, or require, the
creation or imposition of any lien upon or with respect to any of the properties
now owned or hereafter acquired by it, other than the lien granted to Bank.

     (3) Governmental Authority. No authorization, approval or other action by,
and no notice to or filing with, any governmental authority is required for the
due execution, delivery and performance by Borrower of this Security Agreement.

     (4) Legally Enforceable Security Agreement. This Security Agreement is the
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except to the extent that such enforcement may be
limited by (1) applicable bankruptcy, insolvency, and other similar laws
affecting creditors' rights generally, or (2) general equitable principles,
regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law.

     (5) No Restrictions on Collateral. None of the Collateral is subject to a
restriction, which has not been waived with a copy of such waiver delivered to
Bank, that prohibits, restricts or limits the grant of a security interest in
such Collateral pursuant to this Security Agreement, the perfection of the
security interest granted by this Security Agreement (including the priority of
such security interest) or the exercise by Bank of its rights, remedies and
powers under this Security Agreement or otherwise, except in the case of a
Government Contract where compliance with the Assignment of Claim Act of 1940 is
required for the delivery of the payment to Bank of the Account under such
Contract.

     (6) Valid Security Interest. This Security Agreement creates a valid
security interest in the Collateral and such security interest secures the
payment of all Secured Obligations.

     (7) Perfection of Security Interest. Upon the filing of the financing
statement in the location specified in the Perfection Certificate and the
extension of credit to Borrower pursuant to the Revolving Credit Agreement, the
security interest of Bank will be perfected in all of the Collateral as to which
perfection is obtained by such filing.


                                        4

<PAGE>

     (8) Priority of Security Interest. The security interest of Bank in the
Collateral is a first priority security interest and such Collateral is not
subject to any other security interest.

     (9) Claims on Collateral. Borrower owns the Collateral free and clear of
any security interest, except for the security interest created by this Security
Agreement and the security interest (if any) specified in the Perfection
Certificate.

     (10) Perfection Certificate. All information on the Perfection Certificate
is complete, accurate, and correct.

     (11) Acquisition in Ordinary Course of Business. All of the Collateral,
including all Equipment and all Inventory, was acquired in the ordinary course
of business.

     (12) Compliance with Law. All of the Collateral was acquired, used,
produced and sold or disposed of in accordance with all applicable laws,
including in the case of Inventory, the Fair Labor Standards Act.

     (13) Inventory. None of the Inventory is held on consignment or subject to
a sale or return or sale on approval or similar arrangement.

     (14) Equipment. All Equipment which is useful or necessary to the business
of Borrower is in good repair, ordinary wear and tear excepted.

     (15) Accounts. All Accounts have been originated by Borrower. None of the
Accounts have either been sold to another party or otherwise transferred or
delivered to any party for the purpose of collecting such Account. Borrower is
duly qualified in all states where required to enable Borrower to enforce
collection of its Accounts due from customers residing in that state.

     (16) Contracts. All of the Contracts material to the operation of the
business of Borrower are in full force and effect and Borrower has performed in
all material respects its obligations under each such Contract, and to the
knowledge of Borrower the other parties to each such Contract have performed in
all material respects their respective obligations under each such Contract.

     (17) Farm Products. None of the Collateral constitutes, or is the proceeds
of, farm products.

     Section 10. Covenants. Borrower agrees that:

     (1) Reporting Requirements. Borrower shall immediately notify Bank if (a)
any claim, including any attachment, levy, execution or other legal process, is
made against any or all of the Collateral, (b) any representation and warranty
included in this Security Agreement would no longer be true if made on such
date, (c) there is any material loss or


                                        5

<PAGE>

damage to, or material decline in the value of, or material change in the nature
of, any of the Collateral or (d) there is a redemption or exchange of any or all
of the Collateral. Borrower will furnish to Bank from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with such Collateral as Bank may request, all in
reasonable detail.

     (2) Records. At the location(s) specified on the Perfection Certificate
Borrower will keep and maintain at its expense complete and accurate records
related to the Collateral, including records of all payments made, all credits
granted and all other documentation related to the Collateral.

     (3) Inspection. Upon reasonable notice to Borrower and during normal
business hours Borrower will allow Bank or its designees to visit its offices
and each location where any Collateral is located to inspect its books and
records, make copies thereof, and inspect the Collateral.

     (4) Restrictions on Collateral. Borrower will not enter into any agreement
or undertaking that restricts or limits the right or ability of Borrower or Bank
to sell, assign or transfer any of the Collateral.

     (5) Defense of Collateral. Borrower will defend the Collateral against all
claims and demands of all parties, other than Bank or any other party listed on
the Perfection Certificate (if any), claiming an interest in any of the
Collateral.

     (6) No Security Interest or Claims. Borrower will not create, permit or
suffer to exist, any security interest on any of the Collateral other than the
security interests under this Security Agreement and those (if any) specified on
the Perfection Certificate. Borrower will discharge or cause to be discharged
all security interests and claims on any or all of the Collateral, except for
the security interest under this Security Agreement and those (if any) specified
on the Perfection Certificate. Borrower will pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against the
Collateral.

     (7) Transfer and Other Security Interests. Borrower shall not sell, assign
(by operation of law or otherwise), transfer or otherwise dispose of any of the
Collateral except for (1) sales, assignments and transfers of Collateral in the
ordinary course of business and (2) the transfer of Collateral to third parties
for preparation or processing of such Collateral.

     (8) Compliance with Law. Borrower will comply in all material respects with
all laws applicable to any or all of the Collateral, except to the extent the
failure to comply will not have a material adverse effect on the rights of Bank
under this Security Agreement, the priority of the security interest of Bank in
the Collateral or the value of the Collateral.


                                        6

<PAGE>

     (9) Insurance. Borrower shall, at its own expense, maintain insurance with
respect to all the Equipment and all the Inventory in such amounts, against such
risks, in such form and with such insurers as are usually carried by companies
engaged in the same or similar business as Borrower and such other insurance as
reasonably required by Bank. Each policy for liability insurance shall (a)
designate Bank as an additional insured and (b) provide for all losses to be
paid on behalf of Bank and Borrower as their respective interests may appear.
Reimbursement under any liability insurance maintained by Borrower may be paid
directly to the party who shall have incurred liability covered by such
insurance. Each policy for property damage insurance shall (a) designate Bank as
the sole loss payee and (b) provide for all losses to be paid directly to Bank.

     In addition, each such policy shall (a) name Bank as an insured party under
such policy (without any representation or warranty by or obligation upon Bank),
(b) contain the agreement by the insurer that any loss under such policy shall
be payable to Bank notwithstanding any action, inaction or breach of
representation or warranty by Borrower, (c) provide that there shall be no
recourse against Bank for payment of premiums or other amounts with respect to
such policy and (d) provide that at least 30 days prior written notice of
amendment to, cancellation of or lapse shall be given to Bank by the insurer.

     If requested by Bank, Borrower shall deliver to Bank (a) original or
duplicate policies of such insurance policies, (b) a report of a reputable
insurance broker with respect to such insurance and (c) duly executed
instruments of assignment of such insurance policies to perfect Bank's security
interest in such policy, including without limitation, acknowledgments of such
assignments from the respective insurers.

     In case of any loss involving damage to Equipment or Inventory, Bank will
determine whether such insurance proceeds shall be used (a) to make or cause to
be made the necessary repairs to or replacements of such Equipment or Inventory
or (b) to pay the Secured Obligations, and if there are any contingent Secured
Obligations, to provide cash collateral to cover such Secured Obligations.

     (10) Equipment. Borrower shall cause the Equipment necessary for the
conduct of its business to be maintained and preserved in good working order,
repair and condition, ordinary wear and tear excepted, and shall forthwith, or
in the case of any loss or damage to any of its Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are necessary
or desirable to so maintain and preserve such Equipment.

     (11) Inventory. In accordance with reasonable business practice, Borrower
will maintain all Inventory in good saleable or useable condition, Borrower will
(c) not sell, assign, lease, mortgage, transfer or otherwise dispose of any
interest in any Inventory other than sales of Inventory in the ordinary course
of business and (d) not use or knowingly permit any of the Inventory to be used
for any unlawful purpose or in violation of any law, or for hire.


                                        7

<PAGE>

     (12) Accounts. Borrower will remain duly qualified in all states where
required to enable Borrower to enforce collection of the Accounts due from
account debtors in that state. Except as otherwise provided in this Security
Agreement, Borrower shall continue to collect, at its own expense, all amounts
due or to become due to Borrower under the Accounts. In connection with such
collections, Borrower may take (and, after the occurrence of an Event of
Default, at Bank's discretion, shall take) such action, as Borrower or Bank may
deem necessary or advisable to enforce collection of the Accounts.

     (13) Contracts. Borrower will perform all of its duties and obligations
under each contract material to the operation of its business. Borrower will
require that all other parties to each such contract perform all of their
respective duties and obligations.

     Section 11. Rights and Remedies. If Borrower fails to perform any agreement
contained in this Security Agreement, Bank may itself perform, or cause
performance of, such agreement.

     Upon the occurrence of an Event of Default Bank may exercise in respect of
any or all of the Collateral each of the following rights, remedies and powers
and Borrower agrees that each of the following rights, remedies and powers is
commercially reasonable:

     (1) General Remedies. Bank may exercise in respect of any or all of the
Collateral all rights, remedies and powers provided for in this Security
Agreement, by law, in equity or otherwise available to it, including all the
rights and remedies of a secured party under the UCC (whether or not the UCC
applies to the affected Collateral).

     (2) Right to Accelerate Obligations Owed to Borrower. To the extent that
any obligation to make payment on any Collateral is not then due or a demand for
payment has not been made and Borrower has the right, in accordance with the
term of such Collateral, to require or make a demand for payment on such
Collateral, Bank has the right to require and to make a demand for payment on
such Collateral.

     (3) Accounts, Contracts, and Other Collateral. Bank has the right to notify
the account debtors or obligors under any Accounts, Contracts and other
Collateral of the security interest of Bank in such Account, Contract or other
Collateral and to direct such account debtors or obligors to make payment of all
amounts due or to become due to Borrower thereunder directly to Bank or to an
account designated by Bank and, upon such notification, to enforce collection of
any such Accounts, Contracts and other Collateral, and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as Borrower might have done. After receipt by Borrower of such notice
from Bank, (a) all amounts and proceeds (including wire transfers, checks and
other instruments) received by Borrower in respect of any Accounts, Contracts,
or other Collateral shall be received in trust for the benefit of Bank under
this Security Agreement, shall be segregated from other funds of Borrower and
shall be forthwith deposited to such account or paid over or delivered to Bank
in the same


                                        8

<PAGE>

form as so received (with any necessary endorsement or assignment) to be held as
Collateral, or be applied as provided by this Section, as determined by Bank and
(b) Borrower shall not adjust, settle or compromise the amount or payment of any
such Account, Contract, or other Collateral or release wholly or partly any
account debtor or obligor thereof, or allow any discount thereon, other than any
discount allowed for prompt payment.

     (6) Assembly of Collateral. Bank may require Borrower to, and Borrower
hereby agrees that it will at its expense and upon the request of Bank
forthwith, assemble all or any part of the Collateral as directed by Bank and
make it available to Bank at a place to be designated by Bank that is reasonably
convenient to both Bank and Borrower.

     (7) Entering Premises. Bank or its designated agents may enter, with or
without judicial process, upon any premises of Borrower and take possession of
all or any part of the Collateral, and remove such Collateral to a location
specified by Bank.

     (8) Deposit Accounts. Bank may notify any or all depository institutions
with which any Deposit Accounts are maintained to remit and transfer all monies,
securities and other property on deposit in such Deposit Accounts or deposited
or received for deposit thereafter to Bank, for deposit in an account as may be
designated by Bank, for application to the Secured Obligations then due and
payable as provided herein. Bank may apply the balance of any Deposit Account
maintained with Bank to pay the Secured Obligations.

     (9) Use of Premises. Bank shall have the right to enter and remain upon
each and every location of Borrower without cost or charge to Bank, and use the
same together with materials, supplies, books and records of Borrower for the
purpose of collecting and liquidating the Collateral, or for preparing for sale
and conducting the sale of the Collateral, whether by foreclosure, auction or
otherwise.

     (10) Sale or Other Disposition of Collateral. Bank may, without notice,
except as specified below, sell, lease, license or otherwise dispose of and
grant options to purchase, lease, license or otherwise acquire, any or all of
the Collateral in one or more parcels at public or private sale or other
disposition, for cash, on credit, for future delivery or otherwise and upon such
other terms, including price, as Bank may deem commercially reasonable in the
exercise of its reasonable business judgment.

     (11) Notice of Sale or Other Disposition of Collateral. Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten (10)
days notice to Borrower of the time and place of any public or private sale is
to be made shall constitute reasonable notification. Bank shall not be obligated
to make any sale of any or all of the Collateral after any notice of sale has
been given. Bank may adjourn any public or private sale from time to time by
announcement at the time and place fixed for such sale, and such sale may,
without further notice, be made at the time and to the place to which it was so
adjourned.


                                        9

<PAGE>

     (12) Commercially Reasonable Sale. Borrower agrees that it is not
commercially unreasonable for Bank (a) to restrict the prospective bidders on or
purchasers of any of the investment property to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
sale of any of such investment property, (b) to fail to incur expenses
reasonably deemed significant by Bank to prepare Collateral for disposition or
otherwise to fail to complete raw material or work in process into finished
goods or other finished products for disposition, (c) to fail to obtain third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (d) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to fail to remove liens or
encumbrances on or any adverse claims against Collateral, (e) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (f) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (g) to contact other persons, whether or not in the
same business as Borrower, for expressions of interest in acquiring all or any
portion of the Collateral, (h) to hire one or more professional auctioneers to
assist in the disposition of Collateral, whether or not the Collateral is of a
specialized nature, (i) to dispose of Collateral by utilizing Internet sites
that provide for the auction of assets of the types included in the Collateral
or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (j) to dispose of assets in wholesale rather than retail
markets, (k) to disclaim disposition warranties, including disclaimers of
warranties of title, possession, quiet enjoyment and the like, (l) to purchase
insurance or credit enhancements to insure Bank against risk of loss, collection
or disposition of Collateral or to provide to Bank a guaranteed return from the
collection or disposition of Collateral, or (m) to the extent deemed appropriate
by Bank, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist Bank in the collection or
disposition of any of the Collateral. Borrower agrees that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions by
Bank would fulfill the duties of Bank under the UCC of the State or any other
relevant jurisdiction in the exercise by Bank of remedies against the Collateral
and that other actions or omissions by Bank shall not be deemed to fail to
fulfill such duties solely on account of not being indicated in this Section.
Without limitation upon the foregoing, nothing contained in this Section shall
be construed to grant any rights to Borrower or to impose any duties on Bank
that would not have been granted or imposed by this Security Agreement or by
applicable law in the absence of this Section.

     (13) Proceeds. If any of the Collateral is sold by Bank upon credit or for
future delivery, Bank shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such failure, Bank may
resell such Collateral. In no event shall Borrower be credited with any part of
the proceeds of sale of any Collateral until and to the extent cash payment in
respect thereof has actually been received by Bank. To the extent any of the
Secured Obligations are contingent, cash proceeds received by Bank in respect of
any sale of, collection from, or other realization upon all


                                       10

<PAGE>

or any part of the Collateral may, in the discretion of Bank, be held by Bank as
collateral for such contingent Secured Obligations. Any cash held by Bank as
Collateral and all cash proceeds received by Bank in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Bank, be applied, first, to pay all costs and expenses
incurred by Bank in connection with or incident to the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any and all of the Collateral, second, to pay all reasonable attorney's fees and
legal expenses incurred by Bank in connection with or incident to the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any and all of the Collateral, third, to pay all matured and
unpaid Secured Obligations, in whole or in part by Bank against, all or any part
of the Secured Obligations in such order as Bank shall elect, fourth, if and to
the extent any of the Secured Obligations are unmatured or contingent, to
provide cash collateral for all such Secured Obligations, and fifth, in
accordance with applicable law. If the proceeds of the sale of the Collateral
are insufficient to pay all of the Secured Obligations, Borrower agrees to pay
upon demand any deficiency to Bank.

     Bank shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies under this Security Agreement. A waiver by
Bank of any right or remedy under this Security Agreement on any one occasion,
shall not be construed as a bar to or waiver of any such right or remedy which
Bank would have had on any future occasion nor shall Bank be liable for
exercising or failing to exercise any such right or remedy.

     (14) Grant of License. Borrower hereby grants to Bank an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Borrower) to use, license or sublicense any intellectual
property now owned or licensed or hereafter acquired or licensed by Borrower,
wherever the same may be located throughout the world, for such term or terms,
on such conditions and in such manner as Bank shall determine, whether general,
special or otherwise, and whether on an exclusive or nonexclusive basis, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license or sublicense by Bank
shall be exercised at the option of Bank.

     Section 12. Appointment of Bank Attorney-in-Fact. Borrower hereby
irrevocably appoints Bank attorney-in-fact, with full authority in the place and
stead of Borrower and in the name of Borrower, Bank or otherwise (1) to take any
and all action and exercise all rights and remedies granted to Bank under this
Security Agreement and (2) execute any instrument which Bank may deem necessary
or advisable to accomplish the purpose of this Security Agreement.

     Borrower hereby ratifies and approves all acts of Bank as its attorney
in-fact pursuant to this Section, and Bank, as its attorney in-fact, will not be
liable for any acts of commission or omission, nor for any error of judgment or
mistake of fact or law, other than those which result from Bank's gross
negligence or willful misconduct. This power,


                                       11

<PAGE>

being coupled with an interest, is irrevocable so long as this Security
Agreement remains in effect.

     Section 13. Borrower Remains Liable. In all events, including the exercise
by Bank of any of the rights under this Security Agreement, Borrower remains
liable to perform all of its duties and obligations under the contracts and
agreements included in the Collateral to which it is a party to the same extent
as if this Security Agreement had not been executed. Bank shall not have any
obligation or liability under any such contracts and agreements by reason of
this Security Agreement, nor shall Bank be obligated to perform any of the
obligations or duties of Borrower under, or to take any action to collect or
enforce any claim or rights under, any such contract or agreement.

     The powers conferred on Bank under this Security Agreement are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it under this
Security Agreement, Bank shall not have any duty as to any such Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any such Collateral.

     Section 14. Indemnity and Expenses. Borrower agrees to indemnify Bank and
each of its directors, officers, employees, agents and affiliates from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement or the transactions contemplated by this Security
Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting from the gross
negligence or willful misconduct of the person to be indemnified. Borrower will
upon demand pay to Bank the amount of any and all expenses, including the
reasonable fees and out of pocket disbursements of its counsel and of any
experts and agents, which Bank may incur in connection with (1) any amendment to
this Security Agreement, (2) the administration of this Security Agreement, (3)
filing or recording fees incurred with respect to or in connection with this
Security Agreement, (4) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral, (5)
the exercise or enforcement of any of the rights of Bank under this Security
Agreement, or (6) the failure by Borrower to perform or observe any of the
provisions of this Security Agreement.

     Section 15. Amendments. No amendment or waiver of any provision of this
Security Agreement nor consent to any departure by Borrower from this Security
Agreement shall in any event be effective unless the same shall be in writing
and signed by Bank and Borrower, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

     Section 16. Addresses for Notices. All notices and other communications
provided for under this Security Agreement shall be given in accordance with the
terms of the Revolving Credit Agreement.


                                       12

<PAGE>

     Section 17. Continuing Security Interest, Transfer of Secured Obligations.
Notwithstanding the fact that there may be no Secured Obligations outstanding
from time to time, this Security Agreement shall create a continuing security
interest in all of the Collateral. This Security Agreement shall be binding upon
Borrower, its successors and assigns, and inure to Bank and its successors,
transferees and assigns. Borrower may not transfer or assign its obligations
under this Security Agreement. Bank may assign or otherwise transfer all or a
portion of its rights or obligations with respect to the Secured Obligations to
any other party, and such other party shall then become vested with all the
benefits in respect of such transferred Secured Obligations and the security
interest granted to Bank pursuant to this Security Agreement or otherwise.
Borrower agrees that Bank can provide information regarding Borrower to any
prospective or actual successor, transferee or assign.

     Section 18. Submission to Jurisdiction. Borrower hereby irrevocably submits
to the jurisdiction of any federal or state court sitting in the County of
Nassau in the State of New York over any action or proceeding arising out of or
related to this Security Agreement and agrees with Bank that personal
jurisdiction over Borrower rests with such courts for purposes of any action on
or related to this Security Agreement. Borrower hereby waives personal service
by manual delivery and agrees that service of process may be made by mail
(certified mail, return receipt requested) directed to Borrower at the address
of Borrower for notices under this Security Agreement or at such other address
as may be designated in writing by Borrower to Bank, and that upon mailing of
such process such service will be effective as if Borrower was personally
served. Borrower agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any manner provided by law. Borrower further waives any objection
to venue in any such action or proceeding on the basis of inconvenient forum.
Borrower agrees that any action on or proceeding brought against Bank shall only
be brought in such courts.

     Section 19. Set-off. Borrower agrees that, in addition to, and without
limiting, any right of setoff, banker's lien or counterclaim Bank may otherwise
have, Bank shall be entitled, at its option, to offset balances (general or
special, time or demand, provisional or final) held by it for the account of
Borrower, at any of the offices of Bank, in Dollars or any other currency,
against any amount payable by Borrower to Bank under this Security Agreement
which is not paid when demanded (regardless of whether such balances are then
due to Borrower), in which case Bank shall promptly notify Borrower; provided
that Bank's failure to give such notice shall not affect the validity of such
offset.

     Section 20. Governing Law. This Security Agreement shall be governed by and
construed in accordance with the laws of New York without regard to its conflict
of law principles, except to the extent that the validity or perfection of the
security interest under this Security Agreement, or remedies under this Security
Agreement, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than New York.

     Section 21. Miscellaneous. This Security Agreement is in addition to and
not in limitation of any other rights and remedies Bank may have by virtue of
any other


                                       13

<PAGE>

instrument or agreement heretofore, contemporaneously herewith or hereafter
executed by Borrower or by law or otherwise. If any provision of this Security
Agreement is contrary to applicable law, such provision shall be deemed
ineffective without invalidating the remaining provisions of this Security
Agreement. The Perfection Certificate is a part of this Security Agreement as if
fully set forth in this Security Agreement. The headings in this Security
Agreement are for convenience of reference only, and shall not affect the
interpretation or construction of this Security Agreement.

     Section 22. WAIVER OF JURY TRIAL. BORROWER EXPRESSLY WAIVES ANY AND EVERY
RIGHT TO A TRIAL BY JURY IN ANY ACTION ON OR RELATED TO THIS SECURITY AGREEMENT.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       14

<PAGE>

     IN WITNESS WHEREOF, Borrower has caused this Security Agreement to be duly
executed and delivered as of the date of this Security Agreement.

                                        CPI Aerostructures, Inc.


                                        By: /S/ Edward J. Fred
                                            ------------------------------------
                                        Name: Edward J. Fred
                                        Title: Chief Executive Officer,
                                               President and Secretary


                                       15

<PAGE>

                             PERFECTION CERTIFICATE
                                       for
                            CPI Aerostructures, Inc.
NAMES

The exact legal name of CPI Aerostructures, Inc. as it appears in its
organizational documents is: CPI Aerostructures, Inc.

The following lists any other legal name that CPI Aerostructures, Inc. has had
in the last five (5) years and the dates such name(s) were in effect:

The following lists all other names, including trade names or similar
appellations, that CPI Aerostructures, Inc. has used in the last five (5) years
in the conduct of its business:

CHANGE IN STRUCTURE

Except as set fort below, CPI Aerostructures, Inc. has not been a party to a
merger, consolidation or an acquisition of assets in the last five (5) years.

Except as set forth below, CPI Aerostructures, Inc. has not had a change in
structure, including a change in legal form, nature or jurisdiction of
organization, in the last five (5) years.

JURISDICTION OF FORMATION

The jurisdiction of formation of CPI Aerostructures, Inc. is: New York.

TYPE OF ENTITY

The type of legal entity of CPI Aerostructures, Inc. is: corporation.

IDENTIFICATION NUMBERS

The federal taxpayer identification number for CPI Aerostructures, Inc. is:
_______________

The organizational identification number (if applicable) for CPI Aerostructures,
Inc. is: _____________

CERTAIN LOCATIONS

The current chief executive office of CPI Aerostructures, Inc. is located at:

Street   City   State   ZIP Code


                                       16

<PAGE>

The following lists each location at which records relating to the Collateral
are maintained:

Street   City   State   ZIP Code

The following lists each location not specified above at which CPI
Aerostructures, Inc. conducts business:

Street   City   State   ZIP Code

LANDLORDS

The following lists each site leased by Borrower and the name and address of the
landlord for such site:

LETTERS OF CREDIT:

The following lists each Letter of Credit with Borrower as the beneficiary, the
name of issuing bank of such Letter of Credit and the number of each such Letter
of Credit:

Name of Issuing Bank   Letter of Credit Number

COMMERCIAL TORT CLAIMS

The following lists each Commercial Tort Claim of CPI Aerostructures, Inc. and
provides a description of such Claim, including the parties involved, the court
in which the claim was commenced (if applicable), the docket number assigned to
the case (if applicable) and a detailed explanation of the events giving rise to
such claim:

OTHER UCC FILINGS

The following lists each financing statement, other than the financing statement
of Bank, on file with respect to any or all of the Collateral, the secured party
on such statement, the filing office of such statement and the Collateral
covered by such statement:

Secured Party   Filing Office   Collateral Covered

PERFECTION OF SECURITY INTEREST

With respect to any item of Collateral in which a security interest can be
perfected by the filing of a UCC financing statement, the filing of such a
statement in the following jurisdiction will perfect the security interest of
Bank in such Collateral: New York


                                       17


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