What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-12-23 compared with 2024-12-30 · 403 added, 209 removed, 755 unchanged (45% of the section changed)

31 unchanged sentences

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair Value of Acquired Intangible Assets

As described further in Note 4 to the financial statements, on September 27, 2024, the Company entered into and closed the transaction contemplated by the Asset Purchase and License Agreement (the “September 2024 Honeywell Agreement”) with Honeywell International Inc.

(“Honeywell”).

Pursuant to the September 2024 Honeywell Agreement, Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents; an assignment of certain contracts; and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company.

The acquisition was accounted for as a business combination.

The Company accounts for acquisitions of entities or asset groups that qualify as businesses using the acquisition method of accounting.

Accordingly, the purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date, which are

measured in accordance with fair value measurement principles.

The Company’s allocation of the total purchase consideration to the estimated fair values of acquired assets included a fair value of $2,300,000 ascribed to the acquired license agreements.

Management estimated the fair value of the acquired license agreements using the relief from royalty method.

The significant assumptions include:

(i) future expected revenues from customer contracts and license agreements, (ii) royalty rates, and (iii) discount rates.

We identified the fair value of the acquired license agreement intangible assets acquired as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the asset.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions.

Our audit procedures related to the fair value of the acquired license agreements included the following, among others.

● Evaluated the design and implementation of key controls relating to the fair valuations performed on the acquired license agreement intangible assets.

These procedures included, among others, understanding management’s processes over the development of the fair value estimate and related key inputs and assumptions, and over the evaluation of the competency and objectivity of management's third-party valuation specialist.

● Tested the mathematical accuracy of the valuation models utilized by the Company and the completeness, accuracy and relevance of underlying data used in the model.

● Assessed the reasonableness of management’s estimated revenue cash flows by obtaining an understanding of management’s processes for developing projected financial information and comparing the projections to historical results achieved by Honeywell.

● Evaluated the reasonableness of management’s revenue assumptions and tested the source information, including the number of existing customers, through inspection of customer contracts.

● Utilized valuation specialists to evaluate the reasonableness of the royalty rates and discount rates used in the valuation.

● Conducted sensitivity analysis around the royalty rates and discount rate assumptions utilized by management.

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

12 unchanged sentences

Prepaid expenses and other current assets

Assets held for sale

Total current assets

20 unchanged sentences

Retained earnings

Treasury stock, at cost, 2,096,451 shares at September 30, 2024 and at September 30, 2023

Treasury stock, at cost, 339,644 shares at September 30, 2025 and at September 30, 2024, respectively

( 3,460,972 )

15 unchanged sentences

Interest expense

( 1,725,205 )

Interest income

6 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Balance, September 30, 2021

( 5,882,820 )

( 21,368,537 )

Share-based compensation

Exercise of stock options

Issuance of restricted stock awards

The accompanying notes are an integral part of these consolidated financial statements.

shareholders’

Balance, September 30, 2023

1 unchanged sentence

Share-based compensation

Exercise of stock options

Issuance of restricted stock awards

Balance, September 30, 2024

3 unchanged sentences

( 3,460,972 )

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

4 unchanged sentences

Depreciation and amortization

Share-based compensation expense

Stock options

Restricted stock awards

Share-based compensation

Amortization of loan fees

Impairment of long-lived assets

Gain on disposal of property and equipment

( 1,191,743 )

Excess and obsolete inventory cost

Deferred income taxes

( 1,253,842 )

( 1,136,809 )

(Increase) decrease in:

5 unchanged sentences

( 1,192,921 )

( 9,671,694 )

( 2,338,176 )

Prepaid expenses and other current assets

8 unchanged sentences

Purchases of property and equipment

( 6,512,106 )

Acquisition of assets

4 unchanged sentences

Proceeds from the sale of property and equipment

Net cash (used in) provided by investing activities

Net cash (used in) investing activities

( 6,512,106 )

( 16,881,440 )

( 36,158,373 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options

Debt proceeds

Debt payments

( 28,027,002 )

Debt proceeds

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

( 43,825,825 )

Initial Term Loan debt proceeds

Initial Term Loan principal payments

Proceeds from exercise of stock options

Payments of debt issuance costs

Net cash (used in) provided by financing activities

( 4,636,594 )

Net increase (decrease) in cash and cash equivalents

( 2,558,216 )

( 14,153,353 )

Cash and cash equivalents, beginning of year

4 unchanged sentences

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION

Transfer from prepaid inventory to purchases of property and equipment

Transfer from prepaid inventory to inventory

Transfer from prepaid inventory to purchases of property and equipment

Transfer from prepaid inventory to goodwill

Transfer from prepaid inventory to intangible assets, net

Transfer from prepaid expenses and other current assets to PP&E

Transfer from other assets to PP&E

Transfer from intangible assets to goodwill

Transfer from prepaid expenses to intangible assets

The accompanying notes are an integral part of these consolidated financial statements.

INNOVATIVE SOLUTIONS AND SUPPORT, INC.

DBA INNOVATIVE AEROSYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Innovative Solutions and Support, Inc.

(the “Company,” “IS&S,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988.

dba Innovative Aerosystems, Inc.

(the “Company,” “we” or “us”) was incorporated in Pennsylvania on February 12, 1988.

The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services avionics products and systems for retrofit applications and original equipment manufacturers (“OEMs”).

1 unchanged sentence

This strategy, as both a manufacturer and integrator, is designed to leverage the latest technologies developed for the computer and telecommunications industries into advanced and cost-effective solutions for the general aviation, commercial air transport, Department of Defense (“DoD”), governmental and foreign military markets.

This approach, combined with the Company’s industry experience, is designed to enable IS&S to develop high-quality products and systems, to reduce product time to market and to achieve cost advantages over products offered by its competitors.

This approach, combined with the Company’s industry experience, is designed to enable us to develop high-quality products and systems, to reduce product time to market and to achieve cost advantages over products offered by its competitors.

Customers include various OEMs, commercial air transport carriers and corporate/general aviation companies, DoD and its commercial contractors, aircraft operators, aircraft modification centers, government agencies and foreign militaries.

21 unchanged sentences

Acquisition, for additional information.

The Company determined that the transaction met the definition of a business under ASC 805, therefore the Company accounted for the transaction as a business combination and applied the acquisitition method of accounting.

On September 22, 2023, the Company entered into an at-the-market equity offering Sales Agreement (the “ATM Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (the “Sales Agent”), pursuant to which the Company may offer and sell from time to time through the Sales Agent up to $ 40 million of shares of its common stock.

The shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No.

333-267595), which was declared effective by the SEC on October 14, 2022.

The Company filed a prospectus supplement, dated September 22, 2023, with the SEC in connection with the offer and sale of the shares.

Subject to the terms and conditions of the ATM Sales Agreement, the Sales Agent will use commercially reasonable efforts to sell shares of the Company’s common stock from time to time, based upon the Company’s instructions.

The Company is not obligated to sell any shares under the ATM Sales Agreement, and the Company or the Sales Agent may at any time suspend

solicitation and offers under the ATM Sales Agreement or terminate the ATM Sales Agreement.

The Company has provided the Sales Agent with customary indemnification rights, and the Sales Agent will be entitled to compensation for its services of up to 3.0 % of the gross sales price per share of the shares of the Company’s common stock sold through the Sales Agent.

Sales of the shares of the Company’s common stock, if any, under the ATM Sales Agreement may be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made directly on or through Nasdaq or any other existing trading market for the Company’s common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices and/or any other method permitted by law.

During fiscal years 2024 and 2023, we did not sell any shares of common stock under the ATM Sales Agreement.

Concentrations

Major Customers

In fiscal years 2024, 2023 and 2022, the Company derived 42 %, 54 % and 58 %, respectively, of total sales from five customers, although not all the same customers in each year.

Accounts receivable and contract assets related to those top five customers were $ 7.6 million, $ 3.5 million and $ 3.3 million as of fiscal years ended September 30, 2024, 2023 and 2022, respectively.

In fiscal years ended September 30, 2025, 2024 and 2023, the Company derived 57 %, 42 % and 54 %, respectively, of total sales from five customers, although not all the same customers in each year.

Accounts receivable and contract assets related to the Company’s

top five customers were $ 8.7 million, $ 7.6 million and $ 3.5 million as of fiscal years ended September 30, 2025, 2024 and 2023, respectively.

Major Suppliers

1 unchanged sentence

Although there are a limited number of suppliers of particular components, management believes other suppliers could provide similar components on comparable terms.

During fiscal year 2024, the Company had four suppliers that accounted for 63.1 % of the Company’s total inventory related purchases.

During fiscal year 2023, the Company had four suppliers that accounted for 49.0 % of the Company’s total inventory related purchases.

During fiscal year 2022, the Company had three suppliers that accounted for 33.7 % of the Company’s total inventory related purchases.

During the fiscal year ended September 30, 2025, the Company had two suppliers that accounted for 51 % of the Company’s total inventory related purchases.

During the fiscal year ended September 30, 2024, the Company had four suppliers that accounted for 63.1 % of the Company’s total inventory related purchases.

During the fiscal year ended September 30, 2023, the Company had four suppliers that accounted for 49.0 % of the Company’s total inventory related purchases.

Concentration of Credit Risk

11 unchanged sentences

Historically, the Company presented Customer service and Engineering and development contracts Net Sales and Cost of sales separately on the Consolidated Statements of Operations.

For the fiscal year ended September 30, 2024, the Company has aggregated these items into one category, “Services” and reclassified all Customer service and Engineering and development contracts revenues as well as Cost of sales in order to conform the presentation of the consolidated Statements of Operations for Fiscal years ended September 30, 2023 and 2022.

Customer service sales of $ 11.1 million and Engineering and development contracts Net Sales of $ 1.1 million were aggregated into Services sales, for the Fiscal year ended September 30, 2023.

Customer service sales of $ 11.1 million and Engineering and development contracts Net Sales of $ 1.1 million were aggregated into Services sales, for the fiscal year ended September 30, 2023.

Customer service Cost of sales of $ 3.4 million and Engineering and development contracts Cost of sales of $ 0.4 million were aggregated into Services Cost of sales, for the fiscal year ended September 30, 2023.

Customer service Cost of sales of $ 1.5 million and Engineering and development contracts Cost of sales of $ 0.2 million were aggregated into Services Cost of sales for the Fiscal year ended September 30, 2022.

Use of Estimates

1 unchanged sentence

Actual results could differ from those estimates.

Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, long term contracts, evaluation of allowances for credit losses accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering and material costs on engineering development contracts (“EDC”) programs, percentage of completion on EDC programs, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill impairment and contingencies.

Estimates are used in accounting for, among other items, valuation of tangible and intangible assets acquired, evaluation of allowances for credit losses accounts, inventory obsolescence, product warranty cost liabilities, income taxes, engineering development contracts (“EDC”) revenue recognition, the useful lives of long-lived assets for depreciation and amortization, the recoverability of long-lived assets, evaluation of goodwill and indefinite-lived intangible assets impairment and contingencies.

Estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the consolidated statements of operations in the period they are determined.

54 unchanged sentences

Write-offs are recorded at the time a customer receivable is deemed uncollectible.

The Company had no Allowance for doubtful accounts as of the fiscal years ended September 30, 2024 and 2023, respectively.

The Company had no allowance for credit losses as of the fiscal years ended September 30, 2025 and 2024, respectively.

Inventory Valuation

10 unchanged sentences

Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized.

When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale.

When the net realizable value of a disposal group increases during

a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale.

The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group.

The Company had no assets held for sale for the fiscal years ended September, 30, 2025 and 2024.

Property and Equipment

23 unchanged sentences

In addition, the Company enters fixed-price contracts, in which the Company agrees to perform the specified work for a pre-determined price.

The contractual terms of the fixed price contracts are usually long-term, however they often contain a termination for convenience clause that results in us treating these contracts as short-term under ASC 606.

To the extent our actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit or could incur a loss.

For the purpose of accounting for revenue under ASC 606, a contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

consideration.

The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

14 unchanged sentences

5) Recognize revenue when or as the Company satisfies a performance obligation

The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below.

The Company satisfies performance obligations either over time or at a point in time.

Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.

Product sales revenue is recognized point-in-time when the product is sold and shipped to the customer.

Services revenues are recognized over-time upon the completion of the identified performance obligations.

Historically, the Company has also recognized revenue from EDC contracts and is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress.

Contract costs include material, components and third-party avionics purchased from suppliers, direct labor and overhead costs.

Bill-and-hold Arrangements

In certain situations, the Company recognizes revenue under bill-and-hold arrangements with its customers.

Revenue for bill-and-hold arrangements is recognized when product control transfers to the customer, even though the customer does not have physical possession of the product.

Control transfers when the bill-and-hold arrangement has been determined to have substantive reason, the product is identified as belonging to the customer, the product is ready for physical transfer to the customer and the product cannot be used or directed to another customer.

Contract Estimates

1 unchanged sentence

The Company typically measures progress based on costs incurred compared to estimated total contract costs.

Contract cost estimates are based on various assumptions to project the outcome of future events that often span more than a single year.

Contract cost estimates are based on various assumptions to project the outcome

of future events that often span more than a single year.

These assumptions include the amount of labor and labor costs, the quantity and cost of raw materials used in the completion of the performance obligation and the complexity of the work to be performed.

17 unchanged sentences

Amount transferred to receivables from contract assets

( 1,285,317 )

Contract asset additions

2 unchanged sentences

September 30, 2025

* Due to the fact that our fixed price contracts are treated as day-to-day contracts due to the inclusion of termination for convenience clauses, there are no remaining unsatisfied performance obligations at period end to disclose under ASC 606.

The balances for Account receivable were $ 12,956,476 , $ 12,612,482 and $ 9,743,714 for the fiscal periods ended September 30, 2025, 2024 and 2023, respectively.

Lease Recognition

4 unchanged sentences

Income taxes are recorded in accordance with ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”), which utilizes a balance sheet approach to provide for income taxes.

Under this method, the Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets, liabilities and expected benefits of

utilizing net operating losses (“NOL”) and tax credit carry-forwards.

The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment.

At the end of each interim reporting period, the Company prepares an estimate of the annual effective income tax rate and applies that annual effective income tax rate to ordinary year-to-date pre-tax income for the interim period.

interim period.

Specific tax items discrete to a particular quarter are recorded in income tax expense for that quarter.

5 unchanged sentences

The sources of taxable income that may be available to realize the benefit of deferred tax assets are future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and credit carryforwards, taxable income in carry-back years and tax planning strategies which are both prudent and feasible.

For the fiscal year ended September 30, 2021, the valuation allowance was released against all federal and state deferred tax assets with the exception of certain state net operating losses due to positive evidence that the assets are more likely than not to be realized in future years.

The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets.

If the Company were to determine that it would be able to realize additional state deferred tax assets in the future, it would make an adjustment to the valuation allowance which would reduce the provision for income taxes.

The accounting for uncertainty in income taxes requires a more likely than not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

11 unchanged sentences

Differences between estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material effect on the Company’s consolidated financial position but could possibly be material to its consolidated results of operations or cash flow of any one period.

Engineering Development

Total engineering development expense comprises both internally funded research and development (“R&D”), which is expensed in research and development in the consolidated statements of operations, and product development and design charges related to specific customer contracts.

Research and Development

Total research and development expense comprises both internally funded research and development (“R&D”), which is expensed in research and development in the consolidated statements of operations, and product development and design charges related to specific customer contracts.

Engineering development expense consists primarily of payroll-related expenses of employees engaged in EDC projects, engineering related product materials and equipment, and subcontracting costs.

4 unchanged sentences

The carrying value of our debt approximates fair value as the interest rate is variable and approximates current market levels.

For financial assets and liabilities measured at fair value on a recurring basis, fair value is the

price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date.

For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date.

A three-level fair value hierarchy prioritizes the inputs used to measure fair value as follows:

23 unchanged sentences

The fiscal years ended September 30, 2025 and 2024 money market funds balance differs from the cash and cash equivalents balance on the consolidated balance sheet due to the timing of sweep transactions within the PNC cash investment accounts.

The remainder of cash and cash equivalents not held in money market funds are held in checking deposit accounts and equivalents.

The carrying value of Money market funds approximates fair value.

Share-Based Compensation

2 unchanged sentences

Accordingly, adoption of ASC Topic 718’s fair value method results in recording compensation costs under the Company’s stock-based compensation plans.

The Company determined the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model.

Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards.

Time vested RSU’s are valued as of the closing price of the Company’s stock on date of grant.

The Company determines the fair value of its stock option awards at the date of grant using the Black-Scholes option pricing model.

The Company determines the fair value of its Market Stock Unit Awards (“MSU’s”) and Market Stock Option Awards (“MSO”) using Monte Carlo Simulation Option pricing models and generally accepted valuation techniques require management to make assumptions and to apply judgment to determine the fair value of its awards.

These assumptions and judgments include estimating future volatility of the Company’s stock price, expected dividend yield, future employee turnover rates, and future employee stock option exercise behaviors.

3 unchanged sentences

Such adjustments could have a material impact on the Company’s financial position.

Debt Issuance Costs

Debt issuance costs are capitalized as contra-liabilities and amortized as interest expense on a basis that approximates the effective interest method over the term for Initial Term Loan debt.

Contra-liabilities are netted against and presented as a direct deduction from the carrying amount of the Initial Term Loan debt.

Revolving Facility and the Delayed Draw Term Loan debt issuance costs are capitalized as assets and amortized using straight-line amortization to interest expense over the terms of the respective debt.

The capitalized assets related to the Revolving Facility and the Delayed Draw Term Loan are presented as Current Other Assets and Non-Current Other Assets on the Consolidated Balance Sheet.

Warranty Reserves

13 unchanged sentences

At September 30, 2025 and 2024, the estimated liability for medical claims incurred but not reported was $ 153,000 and $ 98,300 , respectively.

The Company has recorded the excess of funded premiums over estimated claims incurred but not reported of $ 36,400 as a current asset in the accompanying consolidated balance sheet.

During the fiscal year ended September 30, 2024, the Company has used the excess of funded premiums to reduce amounts payable for claims incurred.

The Company has recorded the deficit of funded premiums over estimated claims incurred but not reported of 153,000 as a current liability in the accompanying consolidated balance sheet.

Treasury Stock

1 unchanged sentence

Treasury stock purchased with intent to retire (whether or not the retirement is actually accomplished) is charged to common stock.

ATM Sales Agreement

The shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No.

333-267595), which was declared effective by the SEC on October 14, 2022.

The Company filed a prospectus supplement, dated September 22, 2023, with the SEC in connection with the offer and sale of the shares.

The Company is not obligated to sell any shares under the ATM Sales Agreement, and the Company or the Sales Agent may at any time suspend solicitation and offers under the ATM Sales Agreement or terminate the ATM Sales Agreement.

During fiscal years ended September 30, 2025 and 2024, we did no t sell any shares of common stock under the ATM Sales Agreement.

New Accounting Pronouncements

1 unchanged sentence

ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company's Consolidated Financial Statements.

In November 2024, the FASB issued ASU No.

2024-03 (“ASU 2024-03”), Disaggregation of Income Statement Expenses.

The guidance primarily will require enhanced disclosures about certain types of expenses.

The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027 and may be applied either on a prospective or retrospective basis.

We are evaluating the impact of the standard on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

3 unchanged sentences

The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

1 unchanged sentence

The new standard requires the disclosure of the Company’s Chief Operating Decision Maker (CODM), expanded incremental line-item disclosures of significant segment expenses used by the CODM for decision-making, and the inclusion of previous annual only segment disclosure requirements on a quarterly basis.

This ASU should be applied retrospectively for fiscal years beginning after December 15, 2023, and interim periods

within fiscal years beginning after December 15, 2024.

For all public business entities, ASU 2023-07 was effective for annual periods beginning after December 31, 2023 and interim periods with fiscal years beginning after December 15, 2024;

early adoption is permitted.

The Company is currently evaluating the impacts of this guidance on the Company’s Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In June 2016, FASB issued ASU 2016-13, “ Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instrument” (“ASU 2016-13”).

ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

ASU 2016-13 is effective for SEC small business filers for fiscal years beginning after December 15, 2022.

The adoption of this standard did not have a material impact on our condensed consolidated financial statements or related disclosures.

On September 27, 2024, the Company entered into and closed the transaction contemplated by the September 2024 Honeywell Agreement.

The September 2024 Honeywell Agreement allows the Company to diversify its product offerings in the aerospace industry.

The Company evaluated and adopted this guidance in the fiscal year ended September 30, 2025.

The Adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

September 2024 Honeywell Agreement

On September 27, 2024, the Company entered into the September 2024 Honeywell Agreement with Honeywell, pursuant to which Honeywell sold, assigned or licensed certain assets related to its various generations of military display generators and flight control computers, including a sale of certain inventory, equipment and customer-related documents;

an assignment of certain contracts;

and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its various generations of military display generators and flight control computers to repair, overhaul, manufacture sell, import, export and distribute certain products to the Company for consideration of $ 14.2 million in cash.

The Company determined that the transaction met the definition of a business under ASC 805;

1 unchanged sentence

The Company financed the September 2024 Honeywell Agreement with borrowings against the Company’s revolving line of credit.

(See Note 20, “Loan Agreement” for more details).

The purchase consideration transferred at the acquisition date was $ 14.2 million, which was entirely cash.

The allocation of the purchase price is based upon certain preliminary valuations and other analyses.

The allocation of the purchase price has not been finalized as of the date of this filing due to the timing of the transaction and due to the fact that, while legal control has been transferred, the Company has not received physical possession of certain of the acquired assets and thus these assets will be subject to settlement adjustments upon transfer as outlined in the September 2024 Honeywell Agreement.

As a result, the purchase price amount for the transaction and the allocation of the preliminary purchase consideration are preliminary estimates, and may be subject to change within the measurement period.

The preliminary allocation of the purchase consideration as of the acquisition date is as follows:

Please see Note 20, “ Loan Agreement ” for more details.

The allocation of the purchase price was based upon certain preliminary valuations and other analyses.

During the fiscal year ended September 30, 2025 and within one year of the purchase date, the Company finalized the allocation of the purchase price.

The allocation of the purchase consideration as of the acquisition date is as follows:

Amounts Recognized as of

Acquisition Date

Purchase Price

(as previously reported)

Period Adjustments

Total consideration

1 unchanged sentence

Prepaid equipment and other current assets

Intangible assets (b)

Intangible assets (b), (d)

( 1,490,000 )

Goodwill (c),(d)

Net assets acquired

3 unchanged sentences

The estimated fair value of these license agreements are based on a variation of the income valuation approach and are determined using the relief from royalty method.

The estimated fair value of the backlog and customer relationships are based on a

variation of the income valuation approach known as the multi-period excess earnings method.

The estimated fair value of the backlog and customer relationships are based on a variation of the income valuation approach known as the multi-period excess earnings method.

Refer to Note 5, “ Intangible assets ” for further details.

1 unchanged sentence

The goodwill recognized is primarily attributable to the expected synergies from the September 2024 Honeywell Agreement.

Goodwill resulting from the September 2024 Honeywell Agreement has been assigned to the Company’s one reporting unit.

Goodwill resulting from the September 2024 Honeywell Agreement has been assigned to the Company’s one reporting unit and is fully deductible for U.S.

income tax purposes.

(d) For the three months ended March 31, 2025, the fair market value of Intangible Assets, mostly related to Acquired Backlog was revised down to reflect lower forecasted margin.

Transition services agreement

2 unchanged sentences

The prepaid expense related to the 2024 TSA was determined using the with and without method.

For the fiscal year ended September 30, 2025, the Company recognized no additional adjustments to prepaid expenses and other current assets within the consolidated balance sheets for services received from Honeywell.

As of September 30, 2025, the TSA has been fully amortized.

Acquisition and related costs

2 unchanged sentences

The following unaudited pro forma summary presents consolidated information of the Company, including the product lines, as if the transaction had occurred on October 1, 2023:

Year Ended September 30,

Fiscal Year Ended September 30,

These pro forma results are for illustrative purposes and are not indicative of the actual results of operations that would have been achieved, nor are they indicative of future results of operations.

8 unchanged sentences

The June 2023 Honeywell Agreement allows the Company to diversify its product offerings in the aerospace industry.

determined that the June 2023 Honeywell Agreement met the definition of a business under ASC 805;

The Company determined that the June 2023 Honeywell Agreement met the definition of a business under ASC 805;

therefore, the Company accounted for the transaction as a business combination and applied the acquisition method of accounting.

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The purchase consideration transferred at the acquisition date was $ 35.9 million, which was entirely cash.

In the third quarter of fiscal year 2024, the Company finalized its accounting of the June 2023 Honeywell Agreement.

In the quarter ended June 30, 2024, the Company finalized its accounting of the June 2023 Honeywell Agreement.

The following purchase price allocation table presents the Company's estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date, and subsequent measurement period adjustments recorded during the one-year period ended June 30, 2024:

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The goodwill recognized is primarily attributable to the expected synergies from the June 2023 Honeywell Agreement.

Goodwill resulting from the June 2023 Honeywell Agreement has been assigned to the Company’s one reporting unit.

(d) In the third quarter of fiscal year 2024, the Company identified measurement period adjustments related to fair value estimates.

The measurement period adjustments were due to the refinement of inputs used to calculate the fair value of the prepaid inventory, equipment, license agreement and customer relationships based on facts and circumstances that existed as of the acquisition date.

Goodwill resulting from the June 2023 Honeywell Agreement has been assigned to the Company’s one reporting unit and is fully deductible for U.S.

income tax purposes.

(d) In the third quarter of fiscal year ended September 30, 2024, and within one year from the acquisition date, the Company identified measurement period adjustments related to fair value estimates.

The measurement period

adjustments were due to the refinement of inputs used to calculate the fair value of the prepaid inventory, equipment, license agreement and customer relationships based on facts and circumstances that existed as of the acquisition date.

One of the refinements of inputs used was a change in classification of prepaid inventory to equipment of $ 3.7 million.

The adjustments resulted in an overall increase to goodwill of $ 3.0 million.

As a result of the measurement period adjustments to the estimated fair values of equipment and customer relationships, during the third quarter of fiscal year 2024, the Company recognized $ 218,623 additional depreciation expense in Cost of sales and $ 67,500 additional amortization expense in selling, general and administrative respectively, related to the effects that would have been recognized in previous quarters if the measurement period adjustments were recognized as of the acquisition date.

For the remaining measurement period adjustments, the

change to the preliminary fair value estimates did not have a material impact to the consolidated statement of operations.

(e) During the fourth quarter of fiscal year 2023, the Company identified measurement period adjustments related to the fair value estimates for accrued expenses.

While the June 2023 Honeywell Agreement indicated an amount of liabilities related to open supplier purchase orders to be assumed by the Company as of the acquisition date, it was determined that there were no actual liabilities outstanding related to these open supplier purchase orders as of the acquisition date;

As a result of the measurement period adjustments to the estimated fair values of equipment and customer relationships, during the third quarter of 2024, the Company recognized $ 218,623 in additional depreciation expense in cost of sales and $ 67,500 in additional amortization expense in selling, general and administrative respectively, related to the effects that would have been recognized in previous quarters if the measurement period adjustments were recognized as of the acquisition date.

For the remaining measurement period adjustments, the change to the preliminary fair value estimates did not have a material impact to the condensed consolidated statement of operations.

(e) During the fourth quarter of fiscal year ended September 30, 2023, the Company identified measurement period adjustments related to the fair value estimates for accrued expenses.

While the Asset Purchase and License Agreement indicated an amount of liabilities related to open supplier purchase orders to be assumed by the Company as of the acquisition date, it was determined that there were no actual liabilities outstanding related to these open supplier purchase orders as of the acquisition date;

therefore, the $ 3.5 million assumed liabilities preliminarily recorded were reversed.

The adjustments resulted in an overall decrease to goodwill of $ 3.5 million;

the adjustments have no impact to the consolidated statement of operations.

the adjustments have no impact to the condensed consolidated statement of operations.

Transition services agreement

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The prepaid expense related to the 2023 TSA was determined using the with and without method.

As of the three months ended June 30, 2025, the 2023 TSA has been fully amortized.

Acquisition and related costs

For the fiscal year ended September 30, 2024, the Company incurred $ 589,000 of acquisition costs in connection with the June 2023 Honeywell Agreement.

For the fiscal year ended September 30, 2023, the Company incurred acquisition costs of $ 408,961 , which were expensed as incurred and included in selling, general and administrative expenses in the consolidated statement of operations.

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Unaudited actual and pro forma information

For the fiscal year ended September 30, 2023, the Company recognized $ 5.8 million of revenues and $ 3.0 million of net income related to the product lines in the consolidated statements of operations.

For the fiscal year ended September 30, 2023, the Company recognized $ 5.8 million of revenues and $ 3.0 million of net income related to the June 2023 Honeywell Agreement in the consolidated statements of operations.

The following unaudited pro forma summary presents consolidated information of the Company, including the product lines, as if the transaction had occurred on October 1, 2021:

Year Ended September 30,

Fiscal Year Ended September 30,

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The adjustments are based on information available to the Company at this time.

Accordingly, the adjustments are subject to change, and the impact of such changes may be material.

Accordingly, the adjustments are subject to change, and

the impact of such changes may be material.

The unaudited pro forma results do not include any incremental cost savings that may result from the integration.

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and a grant of exclusive and non-exclusive licenses to use certain Honeywell intellectual property related to its communication and navigation product lines to manufacture, upgrade and repair certain additional products for consideration of $ 4.2 million in cash.

The Company accounted for the transaction as an asset acquisition and allocated the cost of the acquisition, including direct and incremental transaction costs, to the tangible and intangible assets based on their relative fair value as detailed under ASC 805 – Business Combinations (“ASC 805”).

Definite lived assets were recorded to the relative fair value of $ 2,601,000 to property and

equipment and $ 430,000 to customer relationships and backlog.

Definite lived assets were recorded to the relative fair value of $ 2,601,000 to property and equipment and $ 430,000 to customer relationships and backlog.

Since license agreements are indefinite lived assets, they were recorded at fair value in the amount of $ 1,240,000 in accordance with ASC 805.

Intangible assets

Intangible assets and Goodwill

The Company’s intangible assets other than goodwill are as follows:

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Customer relationships (a)

( 1,459,861 )

Licensing and certification rights (c)

( 2,098,146 )

(a) As part of the September 2024 Honeywell Agreement, the July 2024 Honeywell Asset Acquisition, and the June 2023 Honeywell Agreement transactions, the Company acquired intangible assets related to the license agreements for the license rights to use certain Honeywell intellectual property, backlog and customer relationships.

The license agreements have an indefinite life and is not subject to amortization;

The license agreements have an indefinite life and are not subject to amortization;

the customer relationships have an estimated weighted average life of ten years .

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As such, no impairment charges have been recorded for the fiscal years ended September 30, 2025 and 2024.

(b) As part of the September 2024 Honeywell Agreement, the Company acquired intangible assets related to backlog with a useful life between four to six years .

(b) As part of the September 2024 Honeywell Agreement, the Company acquired intangible assets related to backlog with a useful life of five years .

An impairment charge of $ 44,400 was recorded during the fiscal year ended September 30, 2023 .

No impairment charges were recorded during the fiscal years ended September 30, 2024 or 2022.

For the fiscal year ended September 30, 2024, license agreement intangible assets included $ 3.5 million related to the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement as well as $ 0.1 million related to the June 2023 Honeywell Agreement post-acquisition adjustments.

For the fiscal year ended September 30, 2024, Customer relationships intangible assets included $ 1.4 million related to the July 2024 Honeywell Asset Acquisition and the September 2024 Honeywell Agreement as well as $ 0.9 million related to the June 2023 Honeywell Agreement post acquisition adjustments.

For the fiscal year ended September 30, 2024, Backlog intangible assets included $ 6.3 million related to the September 2024 Honeywell Agreement.

Intangible asset amortization expense was $ 1,191,361 , $ 270,627 and $ 2,126 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

Intangible asset amortization expense is amortized as a component of selling, general and administrative expense and was $ 2,215,672 , $ 1,191,361 and $ 270,627 for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.

The timing of future amortization expense is not determinable for the licensing and certification rights because they are amortized over a defined number of units.

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Amortization Expense

The Company’s goodwill activity is as follows:

Balance at September 30, 2023

Fiscal 2024 Activity:

Business Combination - September 2024 Honeywell Agreement

Measurement period adjustments

Balance at September 30, 2024

Fiscal 2025 Activity:

Measurement period adjustments

Balance at September 30, 2025

Net Income Per Share

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Basic earnings per share (“EPS”) excludes potentially dilutive securities and is computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted EPS is computed assuming the conversion or exercise of all dilutive securities such as employee stock options and restricted stock units (“RSUs”).

The number of incremental shares from the assumed exercise of stock options and RSUs is calculated by using the treasury stock method.

As of September 30, 2024, 2023 and 2022, there were 361,613 , 224,374 and 57,584 options to purchase common stock outstanding, respectively.

As of September 30, 2024, 2023 and 2022, there were 242,080 , 101,968 and 32,897 shares subject to vesting of restricted stock units outstanding, respectively.

The average outstanding diluted shares calculation excludes options with an exercise price that exceeds the average market price of shares during the period.

For fiscal years 2024 and 2023, 362,000 options and 203,000 options to purchase common stock were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.

For fiscal year 2022, 0 shares were excluded from the calculation of earnings per share as their effect would be anti-dilutive.

Diluted EPS is computed assuming the conversion or exercise of all dilutive securities such as employee stock options (“Options”), Market Stock Options (“MSO’s”), Market Stock Units (“MSU’s”) and restricted stock units (“RSUs”).

The number of incremental shares from the assumed exercise, or vesting of stock options, MSO’s and RSUs is calculated by using the treasury stock method.

The number of incremental shares from assumed conversions of MSU’s is calculated by using the ‘if-converted method.’ As of September 30, 2025, 2024 and 2023, there were 361,613 , 361,613 and 224,374 options to purchase common stock outstanding, respectively.

As of September 30, 2025, 2024 and 2023, there were 105,321 , 0 and 0 shares subject to vesting of MSO’S outstanding, respectively.

As of September 30, 2025, 2024 and 2023, there were 201,000 , 0 and 0 units subject to vesting of MSU’S,

respectively.

As of September 30, 2025, 2024 and 2023, there were 337,749 , 242,080 and 101,968 units subject to vesting of RSU’s outstanding, respectively.

The average outstanding diluted shares calculation excludes options, RSU’s and MSO’s with an exercise price that exceeds the average market price of shares during the period.

For fiscal years ended September 30, 2025, 2024 and 2023, 78,991 , 0 and 0 MSO’s and 212,001 , 362,000 and 203,000 options to purchase common stock were excluded from the computation of diluted earnings per share because the effect would be anti-dilutive.

Employee Retention Tax Credit

The Employee Retention Tax Credit (“ERTC”), created in the March 2020 CARES Act and then subsequently amended by the Consolidated Appropriation Act (“CAA”) of 2021, the American Rescue Plan Act (“ARPA”) of 2021 and the Infrastructure Investment and Jobs Act (“IIJA”) of 2021, is a refundable payroll credit for qualifying businesses keeping employees on their payroll during the COVID-19 pandemic.

Under CAA, ARPA and IIJA amendments, employers can claim a refundable tax credit against the employer share of social security tax equal to 70% of the qualified wages (including certain health care expenses) paid to employees after December 31, 2020 through September 30, 2021.

The Company was deemed an eligible small employer under ERTC and thus applied for benefits under the ERTC for tax quarters ended June 30, 2020, September 30, 2020, and December 31, 2020 and for the tax quarters ended March 31, 2021 and June 30, 2021.

Refunds received by the Company and refunds obtained in any future periods are subject to IRS audit under the applicable statutes of limitations.

The One Big Beautiful Bill Act (“OBBBA”) included provisions impacting the ERC including imposing an extended statute of limitations for the IRS to audit ERC filings for the quarter ended September 30, 2021.

The OBBBA did not include any provisions extending the statute of limitations for auditing ERC filings for quarters ending March 31, 2020 through June 30, 2021.

Following the passing of the OBBBA, the Company determined that the statute of limitations had expired for filings for quarters ending June 30, 2020 through June 30, 2021 and that the Company obtained reasonable assurance over receipt of, and compliance with, the terms of the ERC for refunds received from the IRS for those periods.

Because there is no direct applicable U.S.

GAAP guidance that addresses the recognition and measurement of government assistance received by a business entity, U.S.

GAAP allows for the adoption of other analogous accounting guidance and subsequently adopted guidance found under International Accounting Standards 20, (“IAS-20”), Accounting for Government Grants and Disclosure of Government Assistance .

Under IAS-20, Government grants that become a receivable as compensation for expenses or losses already incurred, or for the purpose of giving immediate financial support to the entity with no tie to future related costs, are recognized in income in the period they become a receivable and there is reasonable assurance that the receipt of the credits are in compliance with the terms of the ERTC.

During the quarter ended September 30, 2025, the Company was awarded $ 1,894,000 under the ERTC program for the aforementioned tax periods.

To aid in the application of the ERTC program, The Company retained consulting services from a third-party consulting firm.

The incremental ERTC consulting services fees incurred related to the ERTC totaled approximately $ 379,000 .

The awards and the fees, totaling a net $ 1,515,000 , are recorded within the “Other income” on the Consolidated Statements of Operations for the fiscal year ended September 30, 2025.

Prepaid Expenses and Other Current Assets

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September 30,

Prepaid insurance

Honeywell TSA Agreement

Assets Held for Sale

The asset classified as held for sale, net consists of the following:

September 30,

Corporate airplane

accumulated depreciation and amortization

As of September 30, 2023, the Company classified $ 2.1 million of net property and equipment as “assets held for sale” on the consolidated balance sheet.

During the year ended September 30, 2023, management of the Company implemented a plan to sell a Company-owned aircraft and commenced efforts to locate a buyer for the aircraft.

On November 20, 2023 the Company-owned aircraft was sold for $ 2.3 million and the Company recorded a gain on disposal of $ 160,577 .

As of September 30 2024, the Company had no assets held for sale.

A/P Pre-payments

Prepaid rotables

Dues, Services and pre-paid insurance

Unamortized debt issuance costs

Property and Equipment

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( 12,409,862 )

Depreciation related to property and equipment was $ 906,581 , $ 427,317 and $ 358,837 in fiscal years 2024, 2023 and 2022, respectively.

During the fiscal year ended September 30, 2024, the Company sold its King Air aircraft and recorded a gain on the sale of approximately $ 161 thousand.

During the fiscal year ended September 30, 2022, the Company sold its Pilatus PC-12 airplane and recognized a gain on the sale of approximately $ 1.2 million.

Non-cash investing activities involving property, plant and equipment comprise the abandonment of fully depreciated assets with an original cost and accumulated amortization of $ 420,544 , $ 94,954 and $ 34,656 in fiscal years 2024, 2023 and 2022, respectively.

Effective April 1, 2024, the Company changed its method of computing depreciation from accelerated methods to the straight-line method for the Company’s property and equipment, except for the manufacturing facility which was already being depreciated using the straight-line method.

Based on ASC 250, “ Accounting Changes and Error Corrections ”, the Company determined that the change in depreciation method from an accelerated method to a straight-line method is a change in accounting estimate affected by a change in accounting principle.

Per the guidance, a change in accounting estimate affected by a change in accounting principle is to be applied prospectively.

The change is considered preferable because the straight-line method will more accurately reflect the pattern of usage and the expected benefits of such assets and provide greater consistency with the depreciation methods used by other companies in the Company’s industry.

The net book value of assets acquired with useful lives remaining will be depreciated using the straight-line method prospectively.

As a result of the change to the straight-line method of depreciating the assets, accumulated depreciation and depreciation expense decreased by $ 113,000 for the fiscal year ended September 30, 2024.

Depreciation related to property and equipment was $ 1,518,048 , $ 906,581 and $ 427,317 in fiscal years ended September 30, 2025, 2024 and 2023, respectively.

Non-cash investing activities involving property, plant and equipment comprise the abandonment of fully depreciated assets with an original cost and accumulated amortization of $ 0 , $ 420,544 and $ 94,954 in fiscal years ended September 30, 2025, 2024 and 2023, respectively.

In connection with June 2023 Honeywell Agreement, during the 18- month period following closing, which ended December 31, 2024, the Company received various inventory and PP&E, which was accounted for as of the acquisition date as prepaid inventory.

Rotables comprised a significant portion of the PP&E received during that 18-month period.

Rotables are parts that are not designed to be discarded after a certain period of use but rather are intended to be restored to a serviceable condition and reused.

The Company had historically depreciated rotables inventory on a straightline basis, over 5 years.

During the quarter ended March 31, 2025, the Company updated its analysis of the economic lives of various owned rotable assets.

As a result of this update, to better reflect the revised estimate of physical lives of rotable assets, the Company changed its useful lives estimate of rotable assets from 5 years to 10 years , effective as of January 1, 2025.

ASC Topic 250, “Accounting Changes and Error Corrections” (“ASC 250”), specifically ASC 250-10-45-17 states that, “changes in accounting estimates should not be accounted for by restating or retrospectively adjusting the amounts reported in prior period financial statements or by reporting pro forma amounts.

Instead, a change in accounting estimate should be accounted for in the period of change and prospective periods.”

Adhering to the guidance found in ASC 250, the Company recognized the change in depreciation expense of rotable assets prospectively as of January 1, 2025.

The change in accounting estimate decreased depreciation expense $ 1.1 million, or $ 0.06 per diluted share for the fiscal year ended September 30, 2025.

Other assets consist of the following:

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September 30,

Operating lease right-of-use assets

Unamortized debt issuance costs and operating lease right-of-use assets

Other non-current assets

Other non-current assets as of fiscal years ended September 30, 2025 and 2024 include a deposit for medical claims required under the Company’s medical plan.

Other non-current assets as of fiscal year ended September 30, 2023 include a security deposit for an airplane hangar.

Accrued Expenses

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Professional fees

Operating lease

Inventory in transit

Royalties and ERC related expenses

Bonus Accruals

Income tax payable

4 unchanged sentences

Warranty cost and accrual information for fiscal years ended September 30, 2025 and 2024:

Warranty accrual as of October 1,

Expense accrual for fiscal year

Warranty cost incurred for fiscal year

Warranty accrual as of September 30,

In August 2022, the U.S.

government enacted the Inflation Reduction Act (the “IRA”).

The IRA makes the following changes to the U.S tax code:

imposes a corporate alternative minimum tax of 15% on corporations with an average annual Adjusted Financial Statement Income over a three year period in excess of $1 billion, increases the amount of R&D credit that qualified businesses can apply against payroll taxes to $500,000 and imposes an excise tax equal to one percent of the fair market value of stock of a publicly traded U.S.

corporation that is repurchased by the company.

These changes predominately apply to tax years beginning after December 31, 2022.

This legislation will not have a material impact on the Company’s tax position.

Warranty accrual, beginning of period

Accrued expense (Adjustment)

Warranty cost

Warranty accrual, end of period

The components of income taxes are as follows:

For the Fiscal Year Ended September 30,

Current provision (benefit):

Total current provision (benefit)

Current provision

Total current provision

Deferred provision (benefit)

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( 1,253,842 )

Total current and deferred provision (benefit)

( 1,136,472 )

Total current and deferred provision

Following is a reconciliation of the statutory federal rate to the Company’s effective income tax rate:

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Change in unrecognized tax benefits

123R cancellations and forfeitures

Stock based compensation awards cancellations and forfeitures

Effective income tax rate

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Reserves and accruals

Research and development credit

NOL carryforwards -fed/state

Stock options

Stock based compensation awards

Valuation allowance

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As a result of positive evidence that the Company’s deferred tax assets are more likely than not to be realized in future years, the Company reduced its valuation allowance of deferred tax assets by $ 299,908 , $ 7,963 and $ 4,069 for fiscal years ended September 30, 2025, 2024 and 2023, respectively, reducing the Company’s provision for income taxes in each fiscal year.

The Company will continue to assess all available evidence during future periods to evaluate any changes to the realization of its deferred tax assets.

Following is a reconciliation of beginning and ending balances of total amounts of gross unrecognized tax benefits:

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Tax regulations within each jurisdiction are subject to the interpretation of related tax laws and regulations and require significant judgment to apply.

The Company’s federal income tax returns for the fiscal years ended September 30, 2021 and thereafter are open years subject to examination by the Internal Revenue Service.The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation.

The Company’s federal income tax returns for the fiscal years ended September 30, 2021 and thereafter are open years subject to examination by the Internal Revenue Service.

The Company files income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation.

There are no state income tax examinations in process at this time.

On July 4, 2025, the United States government enacted into law the OBBBA.

The OBBBA includes a broad range of tax reform provisions affecting businesses, including:

restores bonus depreciation to 100% for all qualified assets placed in service after January 19, 2025, allows for the option to expense all domestic research and experimental expenditures for tax years beginning after December 31, 2024, allows for the option to recaptures all unamortized domestic research and experimental expenditures from prior years, changes the adjusted taxable income formula for interest expense limitation to include depreciation and amortization expense.

These changes predominantly apply to tax years beginning after December 31, 2024.

This legislation did not have a material impact on the Company’s consolidated financial statements.

The Company sponsors a voluntary defined contribution savings plan covering all employees.

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Share-Based Compensation

The Company accounts for share-based compensation under the provisions of ASC Topic 718 by using the fair value method for expensing stock options and stock awards.

At June 30, 2024, the Company’s Amended and Restated Articles of Incorporation provides the Company authority to issue 75,000,000 shares of common stock and 10,000,000 shares of preferred stock.

The Company accounts for share-based compensation under the provisions of ASC Topic 718, “Compensation – Stock Compensation”, by using the fair value method for expensing stock options, performance-based equity awards, market-based equity awards and stock awards.

Total share-based compensation expense was approximately $ 2,336,227 , $ 1,003,292 , and $ 1,450,428 for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.

Compensation expense related to share-based awards is recorded as a component of Cost of sales and selling, general and administrative expenses.

2019 Stock-Based Incentive Compensation Plan

The 2019 Stock-Based Incentive Compensation Plan (the “2019 Plan”) was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019.

The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options and other equity-based awards.

Options granted under the 2019 Plan may be either “incentive stock options” as defined in section 422 of the Code or nonqualified stock options, as determined by the Compensation Committee.

Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000 , plus 139,691 shares of common stock that were authorized but unissued under the 2009 Plan as of the effective date of the 2019 Plan (i.e., April 2, 2019), all of which may be issued pursuant to awards of incentive stock options.

Amended and Restated 2019 Stock-Based Incentive Compensation Plan

The Company’s 2019 Stock-Based Incentive Compensation Plan (as amended, the “2019 Plan”) was approved by the Company’s shareholders at the Company’s Annual Meeting of Shareholders held on April 2, 2019.

The 2019 Plan authorizes the grant of stock appreciation rights, restricted stock, options, performance-based equity awards, and other equity-based awards.

Options granted under the 2019 Plan may be either “incentive stock options” as defined in Section 422 of the U.S.

Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options, as determined by the Compensation Committee.

Subject to an adjustment necessary upon a stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution, or similar corporate transaction or event, the maximum number of shares of common stock available for awards under the 2019 Plan is 750,000 , plus 139,691 shares of common stock that were authorized but unissued under the Company’s 2009 Stock-Based Incentive Compensation Plan as of April 2, 2019, the effective date of the 2019 Plan, all of which may be issued pursuant to awards of incentive stock options.

On April 18, 2024, the Company amended the 2019 Plan to include an additional 1,950,000 authorized shares available for issuance.

As of September 30, 2025, there were 1,375,682 shares of common stock available for awards under the 2019 Plan.

If any award is forfeited, terminates or otherwise is settled for any reason without an actual distribution of shares to the participant, the related shares of common stock subject to such award will again be available for future grant.

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In addition, the Compensation Committee may make adjustments in the terms and conditions of any awards, including any performance goals, in recognition of unusual or nonrecurring events affecting the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.

New shares are typically issued upon option exercise, MSO exercise, MSU or RSU vesting.

The 2019 Plan will terminate on April 2, 2029, unless earlier terminated by the Company’s Board of Directors (the “Board”).

Termination will not affect awards outstanding at the time of termination.

The Board may amend, alter, suspend, discontinue, or terminate the 2019 Plan without shareholder approval, provided that shareholder approval is required for any amendment which (i) would increase the number of shares subject to the 2019 Plan;

(ii) would decrease the price at which awards may be granted;

or (iii) would require shareholder approval by law, regulation, or the rules of any stock exchange or automated quotation system.

Following is a summary of option activity under the 2019 Plan for the fiscal year ended September 30, 2025, and changes during the periods then ended:

3 unchanged sentences

Options exercisable at September 30, 2025

* No options were granted, exercised or cancelled during fiscal year 2025.

** Table excludes MSOs activity, which is disclosed separately.

The following table summarizes information about stock options under the 2019 Plan at September 30, 2025:

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The expected term of options represents the period of time that options granted are expected to be outstanding and is based on historical experience and the expected turnover rate of the employees receiving the options.

Expected volatility is based on historical volatility

of the Company’s stock.

Expected volatility is based on historical volatility of the Company’s stock.

The risk free interest rate is based on U.S.

Treasuries with maturities consistent with the expected life of the options in effect at the time of grant.

Compensation expense for employee stock options includes an estimate for forfeitures and is recognized ratably over the vesting term.

Compensation expense for employee stock options is recognized ratably over the vesting term.

Forfeitures are recognized when incurred.

Below are the fair value assumptions used to record stock option compensation expense, related to the 2019 Plan, for the following periods identified:

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Expected lives (years)

The Company granted 161,613 , 224,374 and 0 options in fiscal years ended 2024, 2023 and 2022, respectively.

* No options were granted, exercised or cancelled during the fiscal year ended September 30, 2025

The Company granted 0 , 161,613 and 224,374 options in fiscal years ended September 30, 2025, 2024 and 2023, respectively.

Total compensation expense associated with stock option awards to employees under the 2019 Plan was approximately $ 143,511 , $ 301,000 , and $ 756,000 for fiscal years ended September 30, 2025, 2024 and 2023, respectively.

At September 30, 2024, unrecognized compensation expense of $ 495,797 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized.

As of September 30, 2025, unrecognized compensation expense of $ 409,527 , net of forfeitures, related to non-vested stock options under the 2019 Plan, will be recognized.

Restricted Stock Units

During fiscal year 2024, the Company’s Board of Directors (the “Board”) approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2024 to vest on the date of the Company’s 2024 Annual Meeting of Shareholders.

2024 RSU Bonus Grants

On February 19, 2025, the Board authorized grants of 71,754 in Restricted Stock Units (“ 2024 RSU Bonus Grants ”) to key employees under the terms and conditions of the 2019 Plan as part of the Company’s initiatives to align employee compensation with Total Shareholder Return.

The Restricted Stock awards vest 50 % on the one-year anniversary from date of grant and 50 % on the two-year anniversary from date of grant, subject to the terms of the 2019 Plan.

During the fiscal year ended September 30, 2025, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2025 to vest on the date of the Company’s 2025 Annual Meeting of Shareholders.

After the 2025 Annual Meeting of Shareholders, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services.

1 unchanged sentence

At the time of vesting, the RSUs will be settled in shares of the Company’s common stock at a rate of one share of stock for each unit, provided that, if a director resigns from the Board prior to the vesting date, such director shall only receive a pro rata portion of such award for time served.

During fiscal year 2024, the Board approved grants of RSUs to both the Chief Executive Officer, Chief Financial Officer and the former Chief Financial Officer.

During the fiscal year ended September 30, 2025, the Board approved grants of RSUs to both the Chief Executive Officer and the Chief Financial Officer that vest 25 % after one year and the remainder vesting quarterly over a three-year period.

During the fiscal year ended September 30, 2024, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services from the beginning of calendar year 2024 to vest on the date of the Company’s 2024 Annual Meeting of Shareholders.

After the 2024 Annual Meeting of Shareholders, the Board approved grants of RSUs to the non-employee directors on the Board as compensation for their services.

Under the terms of the awards, the RSUs will vest on the first anniversary of the grant date.

During the fiscal year ended September 30, 2024, the Board approved grants of RSUs to both the Chief Executive Officer, Chief Financial Officer and the former Chief Financial Officer.

Certain RSUs to the Chief Executive Officer vested immediately, and the remainder will vest quarterly over a three-year period.

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The approved grants of the RSUs to the former Chief Financial Officer would have vested over a four-year period.

On November 8, 2023, Michael Linacre, Chief Financial Officer of Innovative Solutions and Support, Inc., notified the Company of his resignation from all of his positions with the Company, effective immediately, which resulted in the forfeiture of 11,503 RSUs.

On November 8, 2023, the Chief Financial Officer of Innovative Solutions and Support, Inc., notified the Company of his resignation from all of his positions with the Company, effective immediately, which resulted in the forfeiture of 11,503 RSUs.

As of September 30, 2025, there were 311,094 restricted stock units outstanding under the 2019 Plan.

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Total share-based compensation expense associated with the annual grant of restricted stock awards under the 2019 Plan was approximately $ 1,340,197 , $ 702,000 and $ 694,000 for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.

At September 30, 2024, unrecognized compensation expense of $ 1,384,896 , net of forfeitures, related to non-vested stock awards under the 2019 Plan, will be recognized.

Compensation expense for restricted stock units is recognized ratably over the vesting term.

Forfeitures are recognized when incurred

As of September 30, 2025, unrecognized compensation expense of $ 1,524,952 , net of forfeitures, related to non-vested stock awards under the 2019 Plan, will be recognized.

Market-Based Restricted Stock Units

During the quarter ended December 31, 2024, to better align executive compensation with the Company’s Total Shareholder Return, the Board approved a special one-time grant of 201,000 market-based restricted stock units (“MSUs”) to the Company’s Chief Executive Officer under the terms and conditions of the 2019 Plan.

The MSU is a restricted stock unit containing vesting terms conditional upon the attainment of both 1) continued service to vesting and 2) stock price appreciation targets indexed against the Company’s actual stock price performance over a specified measurement period.

Under the terms of the 2019 Plan, no MSUs are eligible for vesting prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted under certain conditions subject to the plan provisions.

Subject to the terms of the 2019 Plan, under the terms of the grant, the MSU will vest as follows:

1) an initial one -third (1/3rd) of the MSUs shall vest on the first trading date after the shares of the Company’s common stock have traded at a price equal to or greater than ten dollars ($ 10.00 ) per share for twenty ( 20 ) consecutive trading days or as provided in the provisions of the second succeeding paragraph below;

2) an additional one -third (1/3rd) of the MSUs shall vest on the first trading date after shares of the Company’s common stock have traded at a price equal to or greater than twelve dollars ($ 12.00 ) per share for twenty ( 20 ) consecutive trading days;

3) the remaining MSUs shall vest on the first trading date after the shares of the Company’s common stock have traded at a price equal to or greater than fourteen dollars ($ 14.00 ) per share for twenty ( 20 ) consecutive trading days.

Additionally, if the tranche of MSUs subject to vesting pursuant to (1) above does not vest on or before November 20, 2027, then, with respect to such MSUs, the target trading price for the Company’s common stock will be increased to twelve dollars ($ 12.00 ) per share, such that the MSUs subject to (1) above will vest on the first trading date after shares of the Company’s common stock have traded at a price equal to or greater than twelve dollars ($ 12.00 ) per share for twenty ( 20 ) consecutive trading days.

Any MSUs that have not vested on or before the fourth anniversary of the grant date are immediately forfeited.

Compensation expense for MSUs is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards using the graded vesting attribution method.

Forfeitures are recognized when incurred

With respect to each MSU that becomes vested in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSUs.

The Company estimated both the grant-date fair value of the MSUs and the derived vesting periods using a Monte Carlo simulation with the following input assumptions:

Number of MSUs Granted

Grant Date Stock Price

Expected Dividend Rate

Expected Volatility

Weighted average risk-free interest rate

Contractual Term

Utilizing Monte Carlo simulation, the MSUs grant date fair value was estimated to be $ 1,109,340 with a $ 5.52 weighted average grant date fair value per award and the derived vesting periods were estimated to be between 1.2 years and 1.7 years.

For the fiscal years ended September 30, 2025, 2024 and 2023 the Company recognized $ 684,183 , $ 0 and $ 0 , respectively, of compensation expense related to MSU awards.

As of September 30, 2025, unrecognized compensation expense of $ 425,157 associated with non-vested MSUs will be recognized in future periods under the 2019 Plan.

During the fiscal year ended September 30, 2025, no MSUs vested or were forfeited.

On February 13, 2025, the market performance condition for 67,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met, these shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

On July 10, 2025, the market performance condition for an additional 67,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met, these shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

On August 8, 2025, the market performance condition for the final 67,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met, these shares will vest according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

On November 20, 2025, the service condition for all 201,000 units of MSUs granted November 20, 2024 to the Company’s Chief Executive Officer was met.

The market condition for all 201,000 units of MSU’s was met during fiscal year ended September 30, 2025.

Consequently, on November 20, 2025, all 201,000 MSU’s vested according to the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

The unvested compensation expense as of the one-year anniversary date of grant will be immediately expensed and recorded as compensation expense in the first fiscal 2026 quarter ended December 31, 2025.

Time Based Stock Options with market-based exercisability conditions

During the quarter ended March 31, 2025, in a continuing effort to more closely correlate executive compensation with the Company’s Total Shareholder Return, the Board approved a grant of 72,062 time vested stock options with a market based exercise price condition (“MSOs”) to the Company’s Chief Executive Officer and 33,259 MSOs to the Company’s Chief Financial Officer under the terms and conditions of the Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

The MSOs are similar to traditional time vested stock options and vest over four years , with 25 % vesting on the first anniversary of the grant date (February 19, 2026) and the remaining shares vesting quarterly at 6.25 % on the last business day of May, August, November and February of calendar years two, three and four from the date of grant.

However, the MSOs only become exercisable if the Company's share price reaches or exceeds the date of grant closing stock price of $ 8.59 plus a targeted market threshold of 15 %, or $ 9.88 for 20 consecutive trading days at any time during the four-year vesting period.

Once this market threshold is met, the vested shares can be exercised according to the vesting schedule and the terms and conditions set forth in the 2019 Plan.

No MSOs are eligible for vesting or exercise prior to the first anniversary of the date of grant of the award, with the exception of accelerated vesting permitted under certain conditions subject to the plan provisions.

Compensation expense for MSOs is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards using the graded vesting attribution method.

Forfeitures are recognized when incurred

With respect to each MSO that becomes exercised in accordance with the terms of the award agreement, the Grantee will be entitled to receive one share of common stock upon the settlement of the MSOs.

The Company estimated the grant-date fair value of the MSOs awards using a Monte Carlo simulation with the following input assumptions:

Number of MSOs granted

Grant Date Stock Price

Expected Dividend Rate

Expected Volatility

Weighted average risk-free interest rate

Exercise price

Contractual Term

Utilizing Monte Carlo simulation, the aggregate MSOs grant date fair value was estimated to be $ 474,998 with a $ 4.51 weighted average grant date fair value per option and vesting periods were estimated to be between 1 years and 4 years with a 10 year contractual term.

For the fiscal years ended September 30, 2025, 2024 and 2023 the Company recognized $ 168,336 , $ 0 and $ 0 of compensation expense, respectively, related to the MSO awards.

As of September 30, 2025, unrecognized compensation expense of $ 306,664 associated with non-vested MSOs will be recognized in future periods under the 2019 Plan.

During the fiscal year ended September 30, 2025, no MSOs vested or were forfeited .

On June 16, 2025, the Company’s closing share price exceeded the $ 9.88 MSOs targeted market threshold condition for 20 consecutive trading days for the MSOs granted February 18, 2025, thus meeting the market condition for exercisability subject to the vesting schedule and terms and conditions set forth in the Company’s Amended and Restated 2019 Stock-Based Incentive Compensation Plan.

The following table shows share-based compensation expense by line item within our Consolidated Statement of Operations:

For the fiscal year ended September 30,

Cost of sales

Research and development

Selling, general and administrative

Commitments and Contingencies

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Prior balances are disclosed below for comparability.

As of July 2025, the principal shareholder no longer owns any shares of the Company.

Sales to Eclipse amounted to $ 0.2 million, $ 0.2 million and $ 0.3 million for the fiscal years ended September 30, 2025, 2024 and 2023, respectively.

A company in which Parizad Olver (Parchi), a former member of the Board of Directors, is the managing partner and has an ownership interest, received a consulting fee of $ 72,990 in November 2023 for services provided in connection with the sale of the Company’s 2008 Super King Air B200GT SN BY-50.

On October 18, 2024, the Company entered into a consulting agreement with Peduzzi Associated, ltd.

(“PAL”), an entity in which board member Maj.

General Dean serves as President.

PAL will provide consulting services in support of the Company’s business development growth into the DoD.

The term of the agreement is for one year and in consideration for services the Company will pay PAL a retainer of $ 9,500 per month.

For fiscal year 2025, the Company paid PAL $ 114,000 .

Business Segments

The Company operates in one business segment as a systems integrator that designs, develops, manufactures, sells and services, air data equipment, engine display systems, standby equipment, primary flight guidance, autothrottles and cockpit display systems to OEMs, the DoD, the Department of Interior, other government agencies, commercial air transport carriers and corporate/general aviation markets.

OEMs, the DoD, the Department of Interior, other government agencies, commercial air transport carriers and corporate/general aviation markets.

The individual responsible for key decisions within the Company’s business segment is defined as the Chief Operating Decision Maker (“CODM”).

The Company’s CODM is the Chief Executive Officer (“CEO”), Shahram Askarpour.

The CODM is the ultimate decision maker as he is responsible for final decisions in allocating resources to achieve the Company’s strategic objectives and assessing the Company’s performance.

The CEO uses consolidated net income and related expense categories as included in the consolidated statement of operations to assess the performance of the segment and make key strategic and operational decisions, such as capital expenditures allocations, new business acquisitions, operating budget review and approval.

While input is received from other executive management team members, no other individual approves key operating decisions without the approval of the CEO.

There is no management committee or executive committee.

Geographic Data

Most of the Company’s sales, operating results and identifiable assets are generated in the United States.

All long-lived assets are held in the United States.

In fiscal years 2025, 2024 and 2023, net sales outside the United States amounted to $ 16.4 million, $ 22.8 million and $ 15.5 million, respectively.

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Loan Agreement

On June 28, 2023, the Company and one of its subsidiaries entered into an Amendment to Loan Documents (the “Loan Amendment”) with PNC Bank, National Association (the “PNC”), which amends certain terms of that certain Loan Agreement entered into by the parties on May 11, 2023 (the “Loan Agreement” and, as amended, the “Amended Loan Agreement”) and (ii) a corresponding Term Note in favor of PNC (the “Term Note”), which together provide for a senior secured term loan in an aggregate principal amount of $ 20.0 million, with a maturity date of June 28, 2028.

$ 20.0 million, with a maturity date of June 28, 2028.

Availability of funds under the Term Loan was conditioned upon the closing of the transactions contemplated by the Amended Loan Agreement and was used to fund a portion of the 2023 Transaction.

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On September 30, 2024, the Company and one of its subsidiaries, Innovative Solutions and Support, LLC (“ISSL”) entered into an Amendment to Loan Documents (the “Loan 2024 Amendment”) with PNC, which amends certain terms of the Loan Agreement to increase the line of credit with PNC.

Concurrently with the Loan 2024 Amendment, the Company entered into (i) an Amended and

Restated Revolving Line of Credit in favor of PNC (the “A&R Revolving Line of Credit”), and (ii) an Amended and Restated Line of Credit and Investment Sweep Rider with PNC (the “A&R Rider”).

Concurrently with the Loan 2024 Amendment, the Company entered into (i) an Amended and Restated Revolving Line of Credit in favor of PNC (the “A&R Revolving Line of Credit”), and (ii) an Amended and Restated Line of Credit and Investment Sweep Rider with PNC (the “A&R Rider”).

The A&R Revolving Line of Credit Note provides for a senior secured revolving line of credit in an aggregate principal amount of $ 35,000,000 , with an expiration date of December 19, 2028.

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As of September 30, 2024, the Company had availability of $ 6,972,998 under the A&R Revolving Line of Credit.

On July 18 th , 2025, the outstanding balance drawn on the A&R Revolving Line of Credit of $ 25,342,529 was fully paid.

The payoff is considered a debt extinguishment and no gain or loss was recorded upon settlement.

For fiscal year 2025 the A&R Revolving Line of Credit had an effective interest rate of 3.6 percent.

On July 18, 2025, Innovative Solutions and Support, Inc.

(the “Company”), its wholly-owned subsidiary Innovative Solutions and Support, LLC (“Borrower”) and certain domestic subsidiaries entered into a Credit Agreement (the “2025 Credit Agreement”) with J.P.

Morgan Chase Bank, N.A.

(the “Bank”) and the other lender parties thereto, which Credit Agreement provides for the Bank to extend to the Borrower credit facilities in an aggregate principal amount of up to USD $ 100.0 million (the “New Credit Facilities”), consisting of the following:

1) a USD $ 25,000,000 initial term loan facility (the “Initial Term Loan”),

2) a USD $ 30,000,000 revolving credit facility (the “Revolving Facility”) and a;

3) a USD $ 45,000,000 delayed draw term loan facility (the “Delayed Draw Term Loan”).

The New Credit Facilities replaced the Company’s existing $ 35 million Amended and Restated Revolving Line of Credit Note, dated as of September 30, 2024 in favor of PNC Bank, National Association (the “PNC Facility”).

The New Credit Facilities provide expanded liquidity and improved flexibility, better enabling the Company to execute on its long-term growth strategy and capital allocation priorities, consistent with the Company’s focus on driving long-term value creation for its shareholders.

Loans under the New Credit Facilities bear interest at the Borrower's option at either:

(i) the Alternate Base Rate plus an applicable margin, or

(ii) the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin.

The Alternate Base Rate is defined as the highest of (a) the Prime Rate, (b) the Federal Reserve Bank of New York rate for overnight funds plus 0.50 %, and (c) the Adjusted Term SOFR Rate for a one-month period plus 1.00 %, with a minimum rate of 1.00 % per annum.

The Adjusted Term SOFR Rate is the Term SOFR Rate plus 0.10 %.

An applicable margin is determined based on the Company's Total Net Leverage Ratio and ranges from 0.75 % to 1.75 % for Alternate Base Rate loans and from 1.75 % to 2.75 % for Adjusted Term SOFR Rate loans.

The New Credit Facilities mature five years (i.e.

July 18, 2030) following the date of the initial advance (the “Maturity Date”) All outstanding balances are due on the Maturity Date.

For the fiscal year ended September 30, 2025, the Initial Term Loan had an effective interest rate of 7.0 % and the Revolving Facility had an effective interest rate of 8.0 %.

No borrowings were drawn on the Delayed Draw Term Loan.

Initial Term Loan

The Initial Term Loan requires quarterly principal payments of $ 625,000 commencing September 30, 2025, with the remaining balance due on the Maturity Date.

Revolving Facility Loan

The Revolving Facility matures five years (i.e.

July 18, 2030) following the date of the initial advance (the “Maturity Date”) with all outstanding balances due on the Maturity Date.

The Revolving Facility principal is due on the Maturity Date.

All amounts outstanding under the Credit Facilities will be due and payable upon the earlier of the Maturity Date, or the acceleration of the Credit Facilities upon an event of default.

On August 18 , 2025, the balance of $ 2,000,000 on the Revolving Facility was paid off.

There were no additional borrowings on the Revolving facility as of September 30, 2025.

Delayed Draw Term Loan

The Delayed Draw Term Loan requires quarterly principal payments equal to 2.50 % of the original aggregate principal amount commencing with the first scheduled payment date after January 18, 2026, with the remaining balance due on the Maturity Date.

Under the New Term Loan and Revolving Facility, $ 25,000,000 and $ 2,000,000 , respectively were immediately drawn and used to pay $ 25,342,529 as payoff for the A&R Revolving Line of Credit and to pay $ 631,700 in transaction fees and expenses.

The remaining $ 1,026,237.50 balance was deposited by the Company to the PNC Checking account.

Debt Issuance Costs

For the Initial Term loan, debt issuance costs of $ 246,148 were capitalized as contra-liabilities and are amortized as interest expense on a basis that approximates the effective interest method over the term of the Initial Term Loan debt.

Contra-liabilities are netted against and presented as a direct deduction from the carrying amount of debt.

The unamortized balance of the Initial Term loan contra-liabilities as of September 30, 2025 was $ 236,193 .

For the Revolving Facility and the Delayed Draw Term Loan, debt issuance costs of $ 295,378 and $ 443,066 , respectively were capitalized as assets and are amortized using straight straight-line amortization to interest expense over the terms of the respective debt.

The current and non-current capitalized assets related to the Revolving Facility and the Delayed Draw Term Loan are aggregated to Current Other Assets and Non-Current Other Assets on the Consolidated Balance Sheet.

The unamortized balances of the Revolving Facility and the Delayed Draw Term Loan included in current and non-current other assets as of September 30, 2025 were $ 283,252 and 424,878 , respectively

Future borrowings under the Initial Term Loan and Revolving Facility may be used for working capital and general corporate purposes, including permitted acquisitions.

The Delayed Draw Term Loan may only be used for permitted acquisitions.

Debt Collateral and Covenants

The Company’s obligations under the 2025 Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries, including a first priority lien on the Company's Exton facility.

The Company’s Initial Term Loan Facility, Revolving Facility and Delayed Term Loan facility contain affirmative and negative covenants that, among other things, may limit or restrict the Company’s ability to:

create liens and encumbrances;

merge, dissolve, liquidate or consolidate;

make acquisitions and investments;

dispose of or transfer assets;

change the nature of our business;

engage in certain transactions with affiliates;

and enter into hedging transactions, in each case, subject to certain qualifications and exceptions.

In addition, we are required to maintain a maximum net leverage ratio and a minimum fixed charge coverage ratio.

The Company was in compliance with all debt covenants as of September 30, 2025.

Commitment Fees

The 2025 Credit Agreement terms include Revolving Facility and Delayed Draw Term Loan Facility commitment fees.

For the fiscal ended September 30, 2025, unused line of credit fees of $ 15,194 under the Revolving Facility and $ 23,438 under the Delayed Draw Term Loan were included in interest expense.

There were no unused line of credit fees for the fiscal year ended September 30, 2024 and 2023.

Long term debt, excluding contra-liabilities, consisted of the following:

September 30,

Initial Term Loan

Revolving Facility

Delayed Draw Term Loan

A&R Revolving Line of Credit

Less current maturities

Total Long Term Debt

As of September 30, 2025, scheduled annual payments based on the maturities of debt are expected to be as follows:

Annual payments

* Excludes interest payments payable at each debt reset date

Loan Facilities Availability

As of September 30, 2025, the Company had availability of $ 30,000,000 under the Revolving Facility and $ 45,000,000 under the Delayed Draw Term Loan facility.

The Company has the right to request up to $ 25,000,000 in additional revolving commitments or incremental term loans, subject to lender approval and satisfaction of certain conditions.

Subsequent Events

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data