Good day everyone and welcome to CPI Aero's third quarter 2008 conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. I will now turn the conference over to Mr. Ed Fred, CEO and President of CPI Aero. Please go ahead sir.

Thank you, Regina. Good morning and thank you all for joining us for our third quarter 2008 conference call. If you need a copy of the press release issued last evening, please contact Lena Cati of the Equity Group at 212-836-9611 and she will fax or e-mail a copy to you. Also, if you would like to listen to this call again, you can hear a replay on our website's Investor Relations section in about an hour at www.cpiaero.com. Before we get started, I want to remind investors that this conference call will contain forward-looking statements which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. Included in these risks are the government's ability to terminate their contracts with us at any time; the government's ability to reduce or modify its contracts if requirements or budgetary constraints change; the government's right to suspend or bar us from doing business with them; as well as competition in the bidding process for government contracts. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. Additional information concerning these risks can be found in our filings with the SEC. This morning, I will give you a brief overview of our first half results and then hand the call over to Vince Palazzolo, our CFO, so he can walk you through the financial statement details. I will then discuss our current business environment, our outlook for the rest of 2008, and reaffirm our long-term projections through 2011. We will then briefly wrap things up and open the call to questions. Before I start to give you that information to head off a question later on today, the reason CPI put out its…

Thank you, Ed. As reported in our press release, revenue increased approximately 30% to $9,434,095 in the third quarter of 2008 from $7,256,709 in the third quarter of 2007. Gross margin was 23% as compared to 27% in the prior year's third quarter. As expected, the gross margin for both the third quarter and the first nine months of 2008 was close to the annualized gross margin expectations of 24% as we have commenced various long-term programs that tend to be less profitable in the early stages. This is the cause of the significant cost in both labor and material as we perform planning and engineering, mostly related to the Spirit and Boeing contracts necessary to build the initial units for customer approval before we proceed with large scale production. As we transition into the production phase, we will benefit from purchasing and labor economies which should be increasingly evident in the years to come due to the operating leverage that comes with volume. Pretax income for the third quarter was $1,352,122 compared to $862,136 in the prior year's third quarter, and net income for the third quarter increased by 67% to $892,122 or $0.14 per diluted share compared to $535,136 or $0.09 per diluted share in the third quarter of 2007. SG&A expenses for the third quarter of 2008 were approximately $806,000 or 8.5% of revenue compared to approximately $1.131 million or 15.6% of revenue for the third quarter of 2007. SG&A expenses for the first nine months of the year were approximately $3.470 million or 13.2% of revenue compared to approximately $3.317 million or 16.4% of revenue in the first nine months of 2007. New orders for 2008 through October 31st including new releases on previously awarded contracts rose approximately 270% to $51.5 million as compared to $18.9 million for the same time frame in 2007. At this point, let me hand the call back over to Ed for an overview of the business.

Thanks Vince. As just reported, new orders through October 31 were $51.5 million compared to $18.9 million during the same period in 2007. This represents the largest award year in CPI Aero's history and we still have nearly two months left to win new work. We expect that our future revenue mix will continue to reflect a larger proportion of work to be performed in our capacity as a subcontractor to major prime contractors. Importantly, the size and duration of these contracts as well as the stature of the companies that awarded them give us confidence in CPI Aero's long-term growth prospects. Among the major recent awards; a Long-Term Requirements Contract of approximately $70 million from The Boeing Company to provide assemblies for 242 enhanced wings for the A-10 Thunderbolt attack jet. The initial orders under this contract were for $13.2 million. An initial order of $7.9 million as part of a $98 million agreement by a leading global aerospace and defense company to provide structural kits for an in-production aircraft. The eight-year agreement has the potential to generate up to $150 million in revenue to CPI Aero over the life of the program. A long-term multi-million dollar contract from Spirit AeroSystems, the major aerostructure assemblies for the Gulfstream G650 aircraft for which CPI will build fixed leading edge assemblies. This contract should be a significant revenue generator for us in the years to come. There are also a number of Sikorsky programs that represent repeat business like the Hover Infra Red Reduction System or HIRRS module assemblies to use on the UH-60 Black Hawk helicopter as well as programs that have larger requirements and therefore offer follow-on potential such as the awards for the S-92 helicopter. It's important that I point out the distinction and explain the long-term impact…

(Operators instructions) Your first question comes from the line of Adam Mizel with Aquifer Capital. Please state your question. Adam Mizel – Aquifer Capital: Good morning, guys. How are you?

How are you, Adam?

Hi, Adam. Adam Mizel – Aquifer Capital: Good, thanks. As we look out over the next few quarters in 18 months for this company and as this new contract that you won roll in, are we going to see a consistent and steady increase in revenues and earnings, or is there lumpiness that's going to be associated with different timing of different orders and investments and expenses?

There could be, I don't want to call it lumpiness. It won't be dramatic, but you can have a quarter that is perhaps lower than the quarter before it, but doesn't signify that the company is going down in the wrong direction or anything else. There will be quarters where as you're gearing up for particular effort where the revenue will be very extreme compared to the quarter before it, but the quarter following that might drop off a little bit. I don't think you want to view CPI necessarily on a quarterly basis. That's why we project on an annual basis. That's another reason we've never given quarterly guidance. It's not reflective of the 12 months worth of CPI's revenue streams. So, while it may shift a little higher, a little lower in given quarters, I don't think I'd call it lumpy per se. Adam Mizel – Aquifer Capital: Okay. So then a specific one, it always happens when you're into the fourth quarter of the year, which is – should we then be reading into your statements today that the fourth quarter that we're in will be a revenue decrease from the third quarter?

It might be slightly lower. It's also possible we will exceed $35 million by a little bit. Certainly, not newsworthy, not something we're going to go out and revise our projections for, but I wouldn't – if it's lower, it will be slightly lower. Adam Mizel – Aquifer Capital: Got it.

But again, the numbers we gave, the projections we gave were for the annualized basis. You could read into that quite obviously and do the math yourself. So even if revenue was down slightly, we'll be slightly more profitable because we do expect to hit the $2.6 million number. Adam Mizel – Aquifer Capital: You've announced over the last couple of months a number of smaller new business wins relative to the big contracts from the spring time. Have you been winning business along the expectations in your own plans and budgets, are you seeing that your new business wins are accelerating in light of the progress you'd made on the Boeing and the Spirit and the other contracts?

I think the wins that you've seen were, and I'll call them anticipated, maybe not particularly on those programs but we do, obviously in all of our projections, have a certain amount of anticipated success built in. I think what you're seeing more from the success on these other program success wins is the fact that the backlog of these outstanding numbers have gotten so much higher. That's an indication that we're bidding to more companies. As I said right in my script, we are bidding to companies that we don't have business with at the moment, have never had business with at the moment, but now recognize us because of our success in the wins with Spirit and Boeing and Sikorsky. Adam Mizel – Aquifer Capital: The last question would be, any change in the competitive landscape as you are getting more well-known and competing on larger, more higher profile contracts? Are you seeing a different set of competitors or more aggressive competition with you?

At the moment, Adam, I'd say we're seeing the same competitors we saw when we went out on those large contracts. That landscape hasn't changed yet. Don't know that it will. A lot of companies in this economy, et cetera, are redefining themselves, and I don't know that we're going to see new competitors. Quite honestly, we may lose a couple that we've seen previously. I mean, today, for example, not that this necessarily relates to direct competition at this moment, but I don't know if you saw this in the news, but Vought is actually closing one of its plants for the next two months; sent everybody home. Because that plant was designed to work on the 787 and due to the delays, they are in essence furloughing an entire plant. That's not the only company that's having those issues right now. So, it remains to be seen if the competitive landscape will stay the same. I don't think I see it getting harder for us. We've seen the big people; we've seen the little people. I think that most of them will still be around. Our competitive advantage in that environment is we can normally be much more cost effective than the bigger competitors can, and we certainly have the technical capability to compete with them. Adam Mizel – Aquifer Capital: Okay, thank you.

You're very welcome.

Your next question comes from Michael Potter with Monarch Capital. Please state your question. Michael Potter – Monarch Capital: Hey, guys. Congratulations on another really strong quarter.

Thanks Mike. Michael Potter – Monarch Capital: Ed, just talking about Spirit a little bit here, have we begun shipping the leading edges to Spirit for the new G650?

Not yet, Mike. We haven't even begun producing them yet. They are still working on their own engineering to get us the engineering to build the parts. The anticipation now is that deliveries will begin in the first quarter of 2009. I believe it's like a six-month delivery period before you get them all five leading edges, and then we go from there; but deliveries have not started yet, not through any fault of CPI or not necessarily – I'm not accusing Spirit of being at fault either. This is just where the program is at the moment. Michael Potter – Monarch Capital: I guess it's safe to assume that we can expect toward the release of their balance of aircrafts they have deposit on until we begin to ship some of the sets that they've currently ordered.

Absolutely, Mike. And again, the balance of the things, I mean, with this economy, quite frankly, I'd be shocked if they still have 500 orders left six, nine, twelve months from now. That still doesn't mean they're not going to be well in excess of what we've already been given an order for, which is 134 ship-sets. I expect the number to be much more significant. We've already begun internally to work on pricing for much higher numbers, and it just remains to be seen once the economy shakes itself out a little bit and we've delivered parts how much higher they want to go; but we're prepared to go as high as they want to. Michael Potter – Monarch Capital: You also mentioned here, with regards to work on helicopters, is Sikorsky currently the only manufacturer that we're supplying to?

At this moment, yes, but I will tell you that we're also pursuing other helicopter manufacturers. I will name them, you can pick them. The two really large ones; one here in the US, one in Europe. We will go -- we are currently pursuing both, as well as other business jet manufacturers around the world. Michael Potter – Monarch Capital: Okay.

Your next question comes from Russ Silvestri with SKIRITAI Capital. Please state your question. Russ Silvestri – SKIRITAI Capital: Hi, Ed. Russ here.

Hi, Russ. How are you? Russ Silvestri – SKIRITAI Capital: All right. Hey, question in regards to gross margin. When are we going to see that improve and get back up to historical levels? And second, I'm curious why you aren't raising guidance at this point in time for '09?

Okay, I'll let Vince answer the gross margin question for you; but as far as the raising guidance question, why would you want me – what is giving you an indication, Russ, that I should be raising it for something? The awards we've announced since I put that guidance out have not been extremely significant. That guidance had baked into it, if you will, the long-term expected contracts on Boeing, Spirit and Sikorsky, and another unnamed aerospace company. So, I'm not sure what has occurred between the last announcement and this announcement that makes you think we'd raise guidance. Russ Silvestri – SKIRITAI Capital: I guess it's the breadth of orders and the visibility that you have.

That's what made me go out with three years worth of guidance. Russ Silvestri – SKIRITAI Capital: Okay.

Okay? Vince, you want to handle gross margins?

The gross margin, most likely, will begin to ramp up. I would not expect the gross margin to change significantly in the first half of next year. Perhaps by the tail end, as we start getting deeper into the Boeing program and the other major manufacturer on the in-production aircraft. Sorry, if I fumbled over that one a little bit, but say it the right way; then that volume might be able to help our margin over the second half of the year begin to increase. If you're asking when do I think the margins will get back to the historical 30% range? Not before 2010. Russ Silvestri – SKIRITAI Capital: Thank you.

Okay? Russ Silvestri – SKIRITAI Capital: Yes.

Your next question comes from John Kohler with Oppenheimer & Close. Please state your question. John Kohler – Oppenheimer & Close: Hi. Good morning, gentlemen.

Hey, John. How are you? John Kohler – Oppenheimer & Close: Good. How are you?

Very good. John Kohler – Oppenheimer & Close: Quick question on the tax rate. Looks like it was down a little bit and I was wondering if you could comment on that. And then secondly, if you could provide some sort of breakdown, this might be asking too much, as far as the bids outstanding what with the commercial versus defense, or some color perhaps on the in-production versus out of production.

Okay. Let me address tax first. In the 2007 year, we estimated quarterly income taxes based on the 34% federal rate and an allocation percentage of New York State income taxes, which is the only place that we have any physical nexus. New York State changed its corporate income allocation rates to be based on simply sales and no other factors. We have zero sales in New York State. All of our sales are out of New York Sate, so our New York State factor becomes zero, so we pay no New York State tax. That's why the tax rate is now a flat 34%, which is basically just federal tax. John Kohler – Oppenheimer & Close: You expect that to continue then, I'm going to guess?

That is correct. We have no indication that New York is going to change its tax allocations. And at the moment, we have no plans of selling, at least nothing that I'm aware of, selling anything in New York State, so it should stay zero. John Kohler – Oppenheimer & Close: Okay, great.

On the other question, John, I really can't because some of the bidding is not public information. I can't really break it out for you at this moment, but suffice it to say that the $290 million is a very solid mix between commercial and military type programs. I would say to you that about two-thirds of the total amount is bid out to major product manufacturers versus US government direct. John Kohler – Oppenheimer & Close: Okay.

And that's really as much light as I can give you on that currently. John Kohler – Oppenheimer & Close: No, that's great. I appreciate it.

Okay. John Kohler – Oppenheimer & Close: Thanks.

You're welcome, John. Thank you.

(Operator instructions) Your next question comes from Paul Berger [ph] with AMIC Investors [ph]. Please state your question. Paul Berger – AMIC Investors: Good morning, Ed.

Hey, Paul. How are you? Paul Berger – AMIC Investors: Good quarter.

Thank you. Paul Berger – AMIC Investors: A couple of questions. One, on the $9.7 million that you identified as commercial, beside the Spirit, what other commercial projects are you guys working on?

Sikorsky helicopter, the S-92, which is the civilian helicopter product that they use. Paul Berger – AMIC Investors: Okay. And could you give us a little more color on the backlog? It's a great increase this period but such as – like on the Boeing order, where you had basically a $70 million order that could run a lot higher, and you got a $13 million piece of it, how much of that was in backlog? How much would come out of backlog?

When you say backlog, I didn't report any backlog this morning at all. Paul Berger – AMIC Investors: We're not talking about – I'm talking about your outstanding contracts, like the $290 million.

Right. Okay, the $290 million of outstanding bids has nothing to do with that Boeing contract. That Boeing contract has been removed from that number. Paul Berger – AMIC Investors: I understand that but when it was in there, how much of it would've been in it? Would it have been $13 million to $70 million or a higher number?

It would've been the $70 million, Paul. Paul Berger – AMIC Investors: Okay. So (inaudible) you would bring the whole $70 million out?

Absolutely, because it's no longer a potential win. Now it becomes unfunded backlog from the other side of defense. Paul Berger – AMIC Investors: Right, okay. Now, some of those numbers in that $290 million have probably been there for a long time. At what point do they just drop out?

First off, we've cleaned that up already once, so there isn't as much as you would think. It will drop out either when a contract is awarded for one of those that we didn't win or we did win, it will come out of that. Or we get an indication, and most of that would only be US government kind of stuff, the stuff we've been bidding on that hasn't been released because there was no funding available. If they come back to us and ask us to re-bid it, or if the price is still good or anything like that, we'll make a determination whether it still belongs to backlog, whether we think it's a viable situation or not. To that end, I guess, this opens up a little bit of a discussion. Our opinion, and again, I will use the word opinion, so I stress that to anybody who's listening to this call, this is my opinion, the change that will occur in the presidential and the administration in January should lead to many of our aircraft coming home. A war effort that decreases, whether it decreases fully to zero, or decreases into half of what it is now, that remains to be seen but the platform that that candidate run on and was elected on was that he was not going to continue this war effort in the same method it's being fought now. If that is true, many of these planes will come home and much of the money that has been spent for the direct war effort, meaning – and I go as far as food for soldiers, boots, bullets, body armor, tank, you name it, will now not be necessary to be used there, and we would assume it will now go to the…

No problem. Paul Berger – AMIC Investors: And just one final, are any amounts from IDIQ contracts in that amount?

Well, give me a hint, Paul, which amount? Paul Berger – AMIC Investors: In the $290 million, where you are talking about what you're bidding.

Yes. I'm going to say yes to you. I'm sure there is something in there that's in IDIQ, absolutely. Paul Berger – AMIC Investors: But nothing really material?

It's not significant. In the $290 million number, it is not a significant number at all. Paul Berger – AMIC Investors: Okay, great. Thanks a lot.

You're very welcome.

Your next question comes from Carter Newbold with Rutabaga Capital. Please state your question.

Hey guys. Sorry, you just answered it. I didn't know how to get out of the queue.

Okay, Carter. Take care.

Your next question is a follow up question from Michael Potter with Monarch Capital. Michael Potter – Monarch Capital: Hey guys. Can you give us a little update on where the C5 stands? Are we hearing anything with regards to releases?

A hiss [ph] is all we heard, Mike. And I can't give you anything further than that. I don't necessarily know what it means other than the fact that Lockheed is doing the amp and RERP on more aircraft. They've been given the financing to do so by the US government. It is being funded, which logically, should lead us to believe that those aircraft are going to require structural replacements or modifications as well down the road. Do I personally think that we're going to do 112 planes? No. My guess is that the fleet will somehow be narrowed down to a number somewhere in the 50, 60 range. We've heard or read all kinds of things that say, they'll get rid of all the As and only keep Bs, or even if they only kept Bs, that's an awful lot of aircraft, especially when you base it on the line items we have on the C-5 top contract. So, I don't want to be overly optimistic about it because it is four years later, and I truly don't include much work from that contract anymore in my projections or anything else. But given that they are modifying and upgrading C-5s that the government is funding that, I would think there will be some ability for us to generate revenue on the C-5 top. Michael Potter – Monarch Capital: What exactly is Lockheed doing?

Two things. They are – the two programs, I wont give any acronyms but they're doing things. They are doing an Avionics upgrade and they are doing the re-engineering. Two separate programs on the C-5 to; A, obviously, improved its slight capabilities because right now it's on the ground an awful lot. And B, to make it a more powerful aircraft, to make it a quieter aircraft, to make it more efficient on fuel, etc. Michael Potter – Monarch Capital: So they are moving forward with those two programs?

Yes, they are. Which gives me some level of hope that before it's all said and done, we will see some significant revenue on the C-5, but with that said, I will repeat, it is not in anyway should perform a major piece of my projection at all. Michael Potter – Monarch Capital: Okay.

Okay? Michael Potter – Monarch Capital: Great. Thanks guys.

You got it, Mike.

Your next question is a follow up from John Kohler with Oppenheimer & Close. Please state your question. John Kohler – Oppenheimer & Close: Hi.

Hi there. John Kohler – Oppenheimer & Close: Hi. Don't want to put you on the spot. No, I want to put you on the spot.

If I can answer, John, I will. John Kohler – Oppenheimer & Close: If you look at your bidding that you have, it's obviously going over that $60 million in a quarter. And you've got a lot of new business that you've already won, that you're working on producing. If you can maybe help us understand a little bit, me anyway. How you look at new projects to bid on? How you look at scheduling that? And I'm just a little concern that maybe bidding on too many projects, so if you could help me understand that, that'll be great.

That's a very fair question, and one of my concerns has always been – it's great to win the programs but if you can't execute on them, you're really are going to destroy your company. And so, we've taken a lot of care to make sure that doesn't happen. Over the last six to nine months, we've retooled if you will, from a personnel standpoint. We've gotten much, what I call heavier people here. People, who've had a lot of aerospace experience, understand major programs, how they have to be run and how they have to be engineered, how they have to be dealt with. And put them in positions of responsibility to make sure and shepherd [ph] through each of their individual programs. What's very nice about what we've won is that it doesn't all hit you in one den [ph]. It layers itself in. For example, Boeing is nowhere near ready yet to become a major part of our revenue strength. That will occur next year. We'll start to gear up with them. Meanwhile, we'll be working on Spirit in the next month or so, and getting that thing up and running. The third program which is with the other major aerospace manufacture falls in between the two, and even falls out in to 2010, so we have the ability to layer in these programs. Now, with all the stuff we're looking at the sides, the ability to execute becomes a major, major factor in our decision, whether to bid and how aggressively to bid. We are very, very cognizant of what could happen if we win a program with a new company and then can't execute. Our reputation gets destroyed, not only with that company but perhaps in the industry. We will not going to let that…

It's a 100% on the money, actually, John. To give an example in 2004, when we did $30.3 million in revenue as a company, we did that on 350 jobs running concurrently which is a lot to manage. This year, we're on record that we're going to do 35 million. We currently have under a 100 programs running. Much easier to handle, creates operating leverage because we can generate more revenue with less programs, therefore, you don't have to increase stuff to dramatic levels, to get the higher numbers. And we absolutely have changed our floor if you will, as to what we're going to bid on. Back in the early 2000, when we were trying to establish who we were, quite frankly, we've on anything and everything that fit our core confidence on, including $7000 programs if that's what it took. Now, that we are known. Now, that people understand what we can do. The only time we'll bid on a low-price contract If you will is when; A, it's a repeat contract which means there is nothing to do but just go ahead and produce it again, or one of our government buyers, specifically, called us and says, “Would you guys please bid on these because we don't any – somebody else that can do it. We will never turn down for that. I don't care if it's an $8 item. If they requested it from us, if our customer needs it we will do it for them. Other than that, we've certainly raise the bar on what we've been on and we will continue to do that. There'd be nothing greater than to be a $100 million company doing it on 50 jobs, quire frankly. I don't know that we'll ever get there, and don't let anybody read it in to that. But I just said we're going to be a $100 million company with 50 jobs, but I think you get the concept. The less jobs, you require less overheads. You can gain tremendous profitability points that way, and you can still grow your company significantly. John Kohler – Oppenheimer & Close: All right, Ed, I appreciate it. Thanks very much.

You're very welcome, John.

(Operator instructions) The next question comes from David Cohen with Midwood Capital. Please state your question. David Cohen – Midwood Capital: Hey Ed and Vince.

How you doing, Dave?

Hi Dave. David Cohen – Midwood Capital: Along that same line of discussion, are you guys willing to give a sense of the number of jobs on which your longer term outlook is predicating.

The number of jobs? David Cohen – Midwood Capital: Is this – along the same line of you would have – if you need significant number of programs, additional programs in order to hit the forward numbers or is that based upon program, a very small number of programs that you already know about that you, actually, already have.

Yes, the latter Dave, quite honestly, my three-year projections were not high in the sky. They were not – let me throw something out there and see if I can get a stock price up. They are the programs that we have in house, along with some anticipated new business that says, “Here are our results.” If we were to get more long term contracts of the nature of the three contracts we've mentioned many times here now, our numbers would have to go up. So, yes, do we bet on the call a little bit? You always do. You never to say, “This is a number and I'm not getting any new business.” But we've taken a conservative, rational, historical-based approach to what our new business will be and have added it to the major programs and their revenue streams that have been given to us to come up with those three-year projections. Older major programs will simply add to those numbers. David Cohen – Midwood Capital: Okay, great. Thanks.

You're very welcome, Dave.

(Operator instructions) There are no further questions. I will now turn the conference back to management.

Thank you, Regina. Thank you all for participating in the call. I don't believe we'll be speaking to you again prior to 2009, so I'd like to wish everyone a happy thanksgiving and a great holiday season and I look forward to talking to you with our year-end results. Thank you.

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.